HC 

286 
,2 
GO* 


UC-NRLF 


3Efi 


1= 


GERMANY'S 

ECONOMIC  POWER 

of  RESISTANCE 


GUSTAV  CASSEL 

UNIVERSITY  OF  STOCKHOLM. 


GERMANY 
ECONOMIC  POWER 
of  RESISTANCE 


GUSTAV  CASSEL 

UNIVERSITY  OF  STOCKHOLM. 


GERMANY'S 

ECONOMIC  POWER 

OF  RESISTANCE 


BY 

PROF.  GUSTAV  CASSEL 

UNIVERSITY  OF  STOCKHOLM 


NEW  YORK 

THE  JACKSON  PRESS 
1916 


COPYRIGHT  BY  GUSTAV  CASSEL 
STOCKHOLM,  1916 

COPYRIGHT,  1916, 
BY  THE  JACKSON  PRESS 


CONTENTS 

PAGE 

INTRODUCTION    .     . _  •  R     *     .     ;     .     .     .     .     .     .     .  v 

THE  SUPPLY  OF  LABOR  .     .     .   .-.,'.     .     .     .     .     .  i 

THE  INDUSTRIES    .     .  .  .     .     .     .     »     .     .     .     ;     .  12 

AGRICULTURE     .     ...     ,     .     .     .....     .  25 

SUPPLY  AND  DEMAND  OF  COMMODITIES 34 

STATUS  OF  GERMAN  CURRENCY  .     .,  ..i    ;     .     .     .     .  47 

THE   FINANCIAL  PROBLEM    .     .     f  •  ':„     .     .     ...  61 

CONCLUSIONS     .     ... .     .  76 


342604 


INTRODUCTION 

In  February,  1916,  the  German  Minister  at  Stockholm  asked 
me,  as  a  neutral  economist,  to  visit  Germany  to  study  the 
economic  and  financial  conditions  in  that  country  and  embody 
the  result  of  my  observations  and  investigations  in  a  public 
report. 

Quite  naturally,  I  hesitated  before  undertaking  a  task  that 
must  inevitably  be  attended  by  so  many  great  difficulties,  and 
the  completely  satisfactory  performance  of  which  was  quite 
beyond  the  power  of  any  one  individual.  But  equally  obvious 
was  the  fact  that  I  had  placed  before  me  an  opportunity  for 
scientific  study  of  which  I  could  not  refuse  to  take  advantage. 
I  answered,  therefore,  that  I  was  prepared  to  accept  the  invita- 
tion of  the  German  Government  on  the  condition  "  that  my 
journey  was  to  be  considered  as  one  undertaken  for  purely 
scientific  purposes,  having  as  its  sole  object  to  make  an 
objective  investigation  of  things  as  they  really  were,"  and  also 
that  "  an  opportunity  should  be  given  me  of  seeing  all  of  the 
economic  life  of  Germany  that  I  might  consider  necessary  for 
the  execution  of  my  purpose."  The  German  Minister  accepted 
these  conditions  without  the  least  reservation  and  I  started  for 
Germany  at  the  beginning  of  March. 

I  had  stipulated  that  I  should  be  allowed  to  take  a  secretary 
with  me,  and  for  this  post  I  selected  my  amanuensis  at  the 
Stockholm  University,  Mr.  Gunnar  Silver stope,  B.A.  Mr. 
Silverstope  has  been  of  great  aid  to  me  in  recording  the  con- 
versations I  had  with  various  persons  in  Germany  and  also  in 
collecting  material  of  various  kinds. 

My  work  at  the  Stockholm  University  prevented  my  spend- 
ing more  than  three  weeks  in  Germany.  As,  however,  I  was 
able  to  make  good  use  of  this  limited  time  and  as  the  German 
authorities  and  representatives  did  everything  in  their  power 


VI  INTRODUCTION 

to  enable  me  to  meet  the  chief  men  in  various  lines  of 
endeavor,  it  was  possible  for  me  in  the  limited  time  at  my 
disposal  to  obtain  a  broad,  general  view  of  the  economic  and 
financial  position  of  Germany,  and  of  the  general  point  of 
view  of  the  Germans  themselves,  which  is  the  finally  determin- 
ing factor. 

A  scientific  economic  investigation  is  most  valuable  when 
it  is  based,  in  so  far  as  is  possible,  on  statistical  material.  In 
the  present  instance  we  are  limited  in  such  material;  during 
the  war  statistics  have  not  kept  pace  with  the  march  of  events, 
since  there  is  no  sufficient  staff  available  for  this  purpose  and 
publication  of  figures  dealing  with  certain  points  of  military 
value  is  out  of  the  question.  In  a  number  of  matters,  conse- 
quently, I  have  been  forced  to  rely  for  my  information  as  to 
the  actual  condition  of  affairs  on  statements  made  by  men 
prominent  in  those  lines.  So  far  as  I  have  been  able  to  judge, 
the  information  thus  obtained  has  been  given  with  the  greatest 
candor,  with  the  strictest  regard  for  facts,  and  with  no  inten- 
tion of  presenting  matters  in  any  false  light.  It  must  be 
remembered  that  the  German,  whatever  position  he  may  hold, 
is  first  and  foremost  a  specialist,  and  the  information  obtained 
from  him,  despite  the  stress  of  war,  bears  the  impress  of  the 
specialist.  Any  one  with  a  delicate  ear  for  the  finer  distinc- 
tions of  language  can,  of  course,  easily  distinguish  between 
general  phrases  and  the  conscientious  statements  of  the 
specialists. 

Sometimes,  when  information  has  been  given  me,  I  have 
asked:  "Can  I  interpret  this  statement  this  way  or  that? 
Can  I  draw  this  or  that  conclusion  from  it  ?  "  On  very  many 
occasions  I  have  been  told  that  in  the  interests  of  truth  my 
informant  found  it  necessary  to  point  out  certain  restrictions, 
certain  modifications  that  must  be  made.  Unquestionably,  this 
gives  one  the  impression  of  thoroughness  and  reliability. 

I  have  interrogated  persons  in  various  positions  in  life,  and 
in  different  places,  respecting  one  and  the  same  matter,  and, 
by  means  of  comparison,  endeavored  to  form  an  idea  of  the 
actual  state  of  things.  There  are  a  number  of  problems  of 


INTRODUCTION  ,  Vll 

which  only  a  general  idea  is  possible,  and  in  regard  to  which 
answers  received  from  different  quarters  may  vary.  But, 
even  in  such  cases,  the  want  of  agreement  has  not,  as  a  rule, 
been  so  great  that  it  has  been  impossible  to  form  a  fairly, 
reliable  picture  of  the  truth. 

In  economic  questions,  however,  the  problem  is  not  merely 
one  of  collecting  facts,  but  also  —  with  the  assistance  of  theo- 
retical analysis  —  of  forming  an  idea  of  their  actual  meaning, 
and  of  elucidating  general  connections  between  causes  and 
effects.  As  will  be  seen  by  the  following  pages,  I  have,  on 
some  occasions,  formed  a  different  opinion  from  that  enter- 
tained in  Germany. 

The  results  I  have  reached  by  my  observations  and  inquiries 
made,  and  from  the  study  of  the  material  placed  before  me, 
cannot,  in  consequence  of  the  inadequateness  of  this  material, 
lay  claim  to  being  fully  scientific,  but  the  present  investigation 
may  so  far  claim  a  scientific  character,  that  I  have  endeavored 
by  its  means  merely  objectively  to  obtain  a  reply  to  the  ques- 
tion :  "  What  is  the  truth  ?  "  As  everybody  knows,  the  world 
is  divided  into  two  warring  camps,  engaged  in  a  combat  for 
life  and  death,  and,  even  in  neutral  countries,  people  have 
become  hot  partisans  of  one  or  the  other  of  the  groups  of 
nations.  Under  such  circumstances  it  is  not  easy  to  remain 
perfectly  neutral  and  it  may  be  doubted  whether  any  one  is 
altogether  able  to  attain  such  a  position.  But  the  task  is  much 
easier,  and,  I  consider,  quite  possible,  if  we  restrict  ourselves 
to  a  sphere  from  which  we  can  eliminate  all  spiritual  questions, 
and  confine  ourselves  to  a  statement  of  the  actual  condition  of 
things.  This  has  been  my  task.  I  have  not  had  to  express 
any  opinion  as  to  what  has  been  done,  or  as  to  what  result  the 
war  should  have,  or  as  to  any  of  those  questions  which,  at  the 
present  moment,  create  prejudice  and  enmity  among  men. 
I  have  merely  had  to  seek  for  a  reply  to  the  questions :  "  What 
is  the  present  economic  and  financial  position  of  Germany? 
Can  Germany,  assuming  that  the  military  position  remains 
unchanged,  hold  out  economically,  and  for  what  length  of 
time  ?  "  I  am  fully  conscious  that  in  this  matter  I  occupy  thfe 


Vlll  INTRODUCTION 

same  position  as  a  witness  called  before  a  court  of  justice,  to 
give  evidence  as  an  expert.  I  now  give  such  evidence,  making 
all  reservation  for  what  may  be  defective  in  my  capacity  as  an 
observer,  well  knowing  how  insufficient  my  ability  is  for  the 
purpose  of  investigation  but  I  give  it  with  the  assurance  that 
I  have  endeavored  to  present  the  most  objective  view  possible 
of  the  reality. 

It  would,  of  course,  be  most  unsuitable  to  mention  here  any 
names  to  support  my  statements  in  one  case  or  another.  As  I 
said  before,  I  have  had  opportunities  of  enjoying  lengthy  con- 
versations with  the  most  prominent  authorities  in  the  various 
fields  covered  by  my  investigation,  but  the  report  that  follows 
is  not  intended  to  give  any  account  of  such  conversations. 
What  I  have  to  do  in  these  pages  is  to  state  the  impression  I 
received  from  them,  and  from  other  sources,  including  my  own 
observations. 

In  order  to  deal  with  the  matter  in  hand,  the  most  suitable 
plan  is,  I  consider,  to  begin  with  an  analysis  of  the  present 
position  of  the  domestic  economy  of  the  German  nation,  i.e., 
with  an  examination  of  the  resources  at  the  disposal  of  Ger- 
man production,  and  of  the  degree  to  which  this  production  is 
able  to  satisfy  the  wants  of  the  population.  I  shall  then  pass 
on  to  an  investigation  of  the  problem  from  a  monetary  point 
of  view,  giving  first  an  account  of  the  influence  of  the  war  on 
the  monetary  system  itself  and  proceeding,  finally,  to  deal  with 
the  financial  problems  created  by  the  present  conflict. 


GERMANY'S  ECONOMIC  POWER  OF 
RESISTANCE 

THE  SUPPLY  OF  LABOR 

THE  economic  strength  of  a  country  depends,  in  the 
first  place,  on  the  amount  of  the  productive  work 
that  is  carried  on  within  its  borders.  Now,  it  is 
clear  that  a  war  causes  a  very  considerable  disturbance  in  the 
productive  labor  of  a  country,  and  that,  consequently,  a  coun- 
try at  war  must,  as  a  rule,  see  its  capacity  of  production  more 
or  less  diminished.  In  this  connection,  however,  there  is 
noticeable  a  clear  distinction  between  the  period  of  general 
economic  confusion  that  ensues  immediately  on  the  outbreak 
of  war,  and  the  succeeding  period  when  economic  conditions 
have  had  time  to  adjust  themselves  in  accordance  with  the 
conditions  brought  about  by  the  war.  As  far  as  Germany  is 
concerned,  this  distinction  is  a  very  clear  one.  The  first 
months  of  the  war  brought  about  in  the  industrial  life  of  that 
country  an  economic  crisis  of  extraordinary  acuteness.  The 
outbreak  of  the  war  almost  paralyzed  many  important  branches 
of  production,  and  trade  and  transportation  were  hurled  out 
of  their  ordinary  grooves.  The  clearest  picture,  perhaps,  of 
the  disorganizing  influence  of  the  outbreak  of  the  war  is 
offered  by  the  statistics  showing  the  number  of  unemployed. 
On  the  last  day  of  August,  1914,  the  proportion  borne  by  the 
unemployed  members  of  those  trade-unions  that  send  in  re- 
ports on  unemployment  amounted  to  22.4  per  cent,  of  the  total 
number  of  members  —  a  figure  about  10  times  greater  than 
the  normal  one  at  that  period  of  the  year.  The  number  of 
unemployed  diminishes  during  the  months  that  follow,  and, 
from  the  second  quarter  of  1915,  inclusive,  the  figure  is  only 


2         GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

slightly  in  excess  of  the  normal.  The  diagram  on  the  follow- 
ing page  gives  a  clear  view  of  this  variation  in  the  relative 
number  of  the  unemployed  at  the  close  of  each  month,  for  all 
laborers  combined,  and  separately  for  men  and  women.  It 
shows  that  unemployment  now  is  at  a  minimum  for  men,  while 
for  women  it  is  still  fairly  high. 

The  real  extent  of  unemployment  is  seen  better,  however, 
if  we  calculate  the  number  of  days  without  work,  per  100 
members'  days.  We  then  for  the  various  quarters  of  the  year 
find  the  following  figures: 

1909  1910  1911  1912  1913  1914  1915 

I.    January-March   3.2  1.7  1.8  1.8  2.i  3.2  4.5 

II.    April-June    1.9  1.4  i.o  i.i  1.8  2.1  2.6 

III.  July-September 1.2  1.2  i.i  i.i  2.1  11.4  2.0 

IV.  October-December  1.4  1.2  i.i  1.4  2.5  8.7  1.8 

The  first  eight  months  of  the  war  are  characterized  by  a 
general  disarrangement  in  the  economic  life  of  the  country, 
but  this  general  disarrangement  was  overcome;  it  has  been 
possible  so  to  arrange  trade  and  industries  that  the  available 
supply  of  labor  has,  on  the  whole,  been  given  full  employment. 
The  most  important  exception  is  the  textile  industry  which, 
throughout  1915,  showed  marked  unemployment,  rising  to  a 
maximum  of  n  per  cent,  (the  close  of  October).  That  the 
industrial  life  of  Germany,  during  the  war,  has  passed  through 
a  period  of  disorganization  extending  over  about  two-thirds 
of  the  year,  but  has  succeeded  in  adapting  itself  to  the  new 
state  of  things,  is  a  fact  of  very  great  importance  in  judging 
the  economic  strength  of  the  country.  The  disorganization 
has  meant  a  national  economic  loss,  which,  to  judge  from  the 
figures  of  unemployment,  must  have  been  a  very  considerable 
one.  The  fact  that  industrial  life  recovered  control  over  itself 
signifies,  therefore,  a  considerable  increase  in  the  economic 
resources  of  the  country,  as  compared  with  those  existing 
during  the  first  eight  months  of  the  war. 

It  is  clear,  however,  that  the  number  of  workmen  who 
have  been  summoned  to  the  colors  and  whose  normal  pro- 
ductive labor  has  consequently  ceased,  plays  a  still  greater 


THE   SUPPLY   OF   LABOR 


role  as  regards  the  economy  of  the  country.     Quite  naturally, 
no  exact  figures  are  to  be  had  in  this  field,  but  it  would  be  a 


9      10     11     12      1       2 
1916 


Unemployment :  total,  —  for  men, >  —  for  women. 

mistake  to  suppose  that  industrial  life  had  been  entirely  de- 
prived of  male  laborers.  For  the  first  of  January,  1916,  the 
sick-clubs  that  sent  in  their  reports  for  that  day  state  that  the 


4         GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

total  number  of  male  members  in  good  health  amounted  to 
4,747,613.  For  Berlin  it  is  stated  that  the  general  local  sick- 
club  there,  in  the  middle  of  1915,  numbered  150,516  members, 
and  that,  of  this  number,  a  little  more  than  one-half  (50.8  per 
cent.)  were  of  military  age  (between  21  and  45  years).  At 
the  beginning  of  January,  1915,  this  proportion  was  58  per 
cent,  and,  in  July,  1914,  60.7  per  cent.  Thus  the  decrease  in 
the  relative  number  of  male  laborers  of  military  age  was  strik- 
ingly slight  until  the  middle  of  1915.  We  must  not,  however, 
draw  any  general  conclusion  from  this  fact,  for  the  proportion 
of  men  drawn  for  active  service  is  undoubtedly  much  greater 
in  the  country  districts  than  in  the  towns. 

We  should  calculate  that  from  7  to  8  million  men  have 
been  called  away  on  active  service.  We  are  then  forced  to 
ask:  How  is  it  possible,  under  such  circumstances,  for  Ger- 
many's industrial  life  to  exist  at  all?  The  answer  is,  that  the 
labor  which  was  called  away  by  the  war  has,  to  a  very  great 
extent,  been  replaced  by  other  labor,  and  that,  to  no  slight 
degree,  it  is  still  engaged  in  productive  work. 

The  last  statement  is  probably  surprising.  As  a  matter  of 
fact,  it  is  a  chapter  of  the  economy  of  the  war  as  peculiar  as 
it  is  interesting.  Behind  the  German  trenches  there  is  carried 
on  a  most  extensive  and  varied  work  for  the  production  of 
necessaries  of  life.  It  appears  to  be  chiefly  men  of  the  supply 
department  who  are  engaged  in  this  task,  although  other  troops 
are  employed  now  and  then.  The  army  horses  which  in  this 
trench  warfare  are  of  comparatively  little  use,  are  utilized  as 
beasts  of  burden  in  this  military  agriculture.  Within  the  com- 
missariat lines  of  merely  those  parts  of  France  occupied  by 
the  German  forces,  there  were  said  to  be  no  less  than  60  motorr- 
plows  at  work  last  autumn;  in  various  tracts  tillage  was 
carried  on  on  a  most  extensive  scale.  In  one  place,  for 
example,  there  was  one  area  of  some  25,000  acres  being  farmed 
as  one  unit.  In  addition  there  is  a  most  extensive  system  of 
cattle- farming,  with  dairies  and  slaughter-houses,  etc.,  com- 
plete. Both  horned  cattle  and  pigs  are  kept  in  bomb-proof 
underground  rooms  in  the  neighborhood  of  the  trenches. 


THE   SUPPLY   OF   LABOR  5 

Agriculture  is  carried  on  as  close  to  the  scene  of  actual  opera- 
tions as  possible.  Hay,  for  instance,  is  mown  only  a  few 
hundred  yards  behind  the  trenches. 

How  is  it  possible  to  obtain  hands  for  such  an  extensive 
system  of  agricultural  work?  Soldiers  that  can  be  spared 
for  the  purpose  are  an  important  factor.  Of  course,  inhabitants 
of  the  various  places  are  employed  to  a  certain  degree,  and, 
in  addition,  as  we  shall  see  later  on,  so  are  the  prisoners 
of  war.  But  whence  are  obtained  the  expert  leaders  of  such 
work?  The  answer  is  that  they  are  taken  from  among  the 
soldiers,  and  from  among  the  many  volunteers  who  are  too 
old  for  actual  military  service.  Here,  as  in  all  other  spheres 
of  labor,  one  sees  clearly  the  tremendous  resources  in  tech- 
nically trained  people  that  Germany  has  at  her  disposal. 

By  means  of  this  agricultural  work  there  is  gained  not  only 
a  very  necessary  change  of  occupation  for  the  soldiers,  but  an 
addition  to  the  support  of  the  army  which  is  of  real  economic 
importance.  If  we  glance  at  the  map  and  see  the  enormous 
length  of  the  fronts,  we  can  understand  the  great  extent  of  the 
"  commissariat  areas "  and  the  importance  possessed  by  agri- 
cultural work  energetically  pursued  in  these  districts. 

The  fact  that  an  extensive  productive  work  is  carried  on 
by  the  army  in  other  spheres  of  labor  as  well  as,  for  instance, 
in  the  building  and  improvement  of  roads  and  railways, 
should  be  mentioned  here,  chiefly  for  the  purpose  of  bearing 
witness  to  the  labor-resources  the  army  has  at  its  disposal. 

In  the  districts  occupied  by  the  Germans  in  the  eastern  seat 
of  war,  much  has  been  done  by  them  to  improve  the  somewhat 
defective  means  of  communication  formerly  existing.  The 
railways  have  been  rebuilt  in  accordance  with  the  German 
gauge  so  that  German  rolling-stock  can  be  run  over  almost 
all  the  lines.  Towards  the  southeast,  extension  of  the  rail- 
roads by  laying  double  tracks  and  by  other  improvements  has 
taken  place  on  a  large  scale.  Right  through  Belgium  a  four- 
track  railway  is  being  built,  planned  before  the  beginning  of 
the  conflict  but  never  undertaken. 

Of  course,  this  work  is  in  the  first  place  to  serve  immediate 


6         GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

military  purposes,  but  it  certainly  contributes  to  a  more  com 
plete  utilization,  from  an  agricultural  point  of  view  especially 
of  the  districts  which  are  touched  and  should  the  war  be  con 
tinued  for  any  long  period  this  work  will  certainly  play  a  moj 
important  economic  role. 

It  is  obvious  from  these  circumstances  that  Germany's  prc 
ductive  labor  has  not  been  diminished  by  the  call  to  the  color 
to  quite  the  same  degree  that  the  mobilization  figures  woul 
tend  to  show. 

In  this  connection,  special  attention  should  be  directed  t 
the  fact  that  the  military  authorities  in  a  very  great  measur 
take  into  consideration  the  specially  pressing  needs  of  civil  lif 
for  labor  and,  wherever  it  is  necessary,  permit  the  men  calle 
to  the  colors  to  return  to  their  employment  in  the  civil  servic< 
in  business  life,  in  the  chemical  and  mechanical  industries,  i 
coal-mines  and  for  harvesting  work.  Very  naturally,  cor 
sideration  is  paid  first  to  military  needs,  such  as  the  mant 
facture  of  munitions  of  war  and  the  maintenance  of  the  rail 
way  traffic.  But  by  this  method  of  procedure  there  is  gainec 
in  any  case,  a  considerable  surplus  of  labor  for  productior 
and  just  at  the  place  where  such  an  addition  is,  for  the  instan 
most  desirable. 

In  another  respect,  too,  the  war  gives  national  production 
certain  compensation  for  the  labor-supply  of  which  it  ha 
been  deprived.  Of  the  large  number  of  prisoners  in  German} 
by  far  the  greater  part  —  some  1,200,000  men,  it  is  stated - 
are  engaged  in  productive  work.  The  prisoners  are  occupie 
chiefly,  it  may  be  supposed,  in  agriculture,  forestry  and  th 
construction  of  communications,  but  they  also  assist  in  coal 
mining,  in  industries,  in  the  communal  gas-works,  etc.  Cei 
tain  prisoners,  Russians  especially,  have  to  be  trained  for  thei 
work  —  in,  for  example,  mining  —  but  it  is  said  they  wor 
very  well;  on  the  western  frontier  numbers  of  Russians  ar 
at  present  engaged  in  the  iron  and  coal  mines.  The  prisoners 
work  seems,  on  the  whole,  to  be  very  satisfactory.  Astonish 
ment  has  been  expressed  that  it  has  been  found  possible  t' 
place  Russian  prisoners  on  farms,  one  or  two  men  on  each 


THE   SUPPLY   OF   LABOR  7 

while  the  men  belonging  to  the  places  are  away  at  the  war. 
But  apparently  these  Russian  prisoners  are,  on  the  whole, 
fairly  contented  with  their  lot,  and,  in  any  case,  prefer  the 
work  to  the  monotonous  life  in  the  internment  camps,  espe- 
cially as  those  engaged  in  such  labor  probably  enjoy  a  little 
more  liberty,  and  obtain  somewhat  better  food.  At  all  events, 
it  is  a  fact  that  in  this  way  German  industrial  life  has  obtained 
an  addition  of  1,200,000  laborers,  though  they  are  not  to  be 
compared  in  efficiency  with  the  1,200,000  Germans  whose 
places  they  are  supposed  to  fill.  Prisoners'  work  is  of  an 
inferior  quality,  the  degree  to  which  this  is  the  case  depending 
on  the  kind  of  work  performed  and  the  character  of  the  pris- 
oners employed.  Their  work  is,  however,  paid  for  at  a  con- 
siderably lower  rate  than  other  work,  and  as  the  prisoners  do 
not  spend  all  the  wages  they  receive  —  the  greater  part  of  this 
sum  being  kept  in  reserve  for  them  —  it  is  clear  that  such 
labor,  as  long  as  the  war  lasts,  forms  an  actual  and  by  no 
means  unimportant  addition  to  the  national  economy  of 
Germany. 

How  and  to  what  degree  is  that  want  of  labor  made  good 
that  the  war  actually  does  cause?  The  incomparably  most 
important  factor  to  be  mentioned  in  this  connection  is  the 
work  performed  by  women.  The  contribution  made  by  the 
German  woman  toward  the  war  is  simply  magnificent,  and  for 
the  economic  power  of  resistance  of  the  country  this  contribu- 
tion has  been  of  decisive  importance.  It  may  almost  be  said 
that  woman's  labor  has  come  to  the  aid  of  nearly  every  branch 
of  industry,  first  and  foremost,  to  that  of  agriculture,  where 
the  number  of  men  called  to  the  colors  has  been  proportionately 
greatest.  Here  the  women  have  labored  most  arduously  — 
performing  skilled  manual  work  on  the  small  farms  and,  on 
the  larger  ones,  directing  and  organizing  the  labor.  And  this 
task  has  been  crowned  with  success.  During  the  past  winter 
the  season  was  exceptionally  mild  so  that  farming  could  be 
continued  for  an  unusually  long  period,  enabling  the  work  to 
be  carried  out  in  full  with  the  reduced  amount  of  labor  that 
was  to  be  had.  The  want  of  hands,  therefore,  has  hardly 


8         GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

reduced  the  productive  capacity  of  the  farming  districts  t< 
any  essential  degree  as  far  as  regards  the  coming  harvest  yeai 

Manufacturers,  too,  have  made  use  of  woman's  labor  on  ; 
very  large  scale  during  the  war.  It  is  little  short  of  wonderf u 
that  such  a  large  amount  of  previously  untrained  labor  ha 
been  made  useful  in  such  a  short  time.  I  spoke  to  one  of  th 
principal  representatives  of  German  industry  on  the  matter 
In  his  works,  10,000  women  had  been  taken  on  since  the  begin 
ning  of  the  war.  How  was  it  possible  to  bring  such  masse 
up  to  the  standard  which  is  demanded  in  a  modern  mechanica 
workshop  ?  The  answer  was  that,  during  the  war,  the  firm  ha< 
established  special  schools  where  the  instruction  of  women 
hands  had  been  carried  on  systematically. 

He  who,  during  the  war,  pays  a  visit  to  Germany,  be  th 
stay  ever  so  brief,  is  at  once  struck  by  the  new  and  extensiv 
use  that  is  made  of  women  in  the  municipal  tramway  service 
In  Berlin,  as  far  as  one  can  see,  most  of  the  conductors  ar 
women.  But  women-drivers  of  electric  trams  are  also  to  b 
found  in  other  large  towns;  in  Frankfort-on-Main,  fo 
example,  this  phenomenon  was  quite  common.  No  incon 
venience  seemed  to  ensue,  but  it  was  stated  that  it  was  usua 
for  women  so  employed  to  have  a  somewhat  shorter  work 
day,  in  some  cases,  but  half  a  day.  By  this  means,  howevei 
the  tramway  service  can  be  kept  up,  and  as  far  as  could  b 
seen,  to  its  normal  extent. 

One  field  of  work  from  which,  in  peace-time,  the  Germa 
woman,  unlike  the  Swedish,  is  almost  totally  excluded,  is  bank 
employment.  One  of  the  principal  bank  directors  in  German 
gave  me  the  following  explanation  of  this.  As  a  matter  o 
principle,  his  bank  accepted  none  but  men  applicants,  sine 
none  but  men  are  desired  for  responsible  positions  in  financia 
institutions.  In  each  clerk  there  may  be  a  future  financia 
leader,  a  man  predestined  to  fill  the  very  first  position  in  th 
bank.  Now,  however,  it  has  been  found  necessary  to  adop 
other  views  and,  since  the  war,  the  large  German  banks  hav 
engaged  hundreds  and  hundreds  of  women,  one  single  establish 
ment  having  no  less  than  500  women  on  its  staff  in  Berli: 


THE   SUPPLY   OF   LABOR  9 

alone.  Whence  have  these  women  come,  and  how  has  it  been 
found  possible  to  place  them  at  the  bank-desk  at  once?  The 
answer  is  that  the  greater  number  have  been  recruited  from 
the  less  important  branches  of  trade  which  in  consequence  of 
reduced  business  have  less  need  of  assistants,  or  have  seen 
themselves  obliged  to  engage  persons  possessing  fewer  quali- 
fications than  those  discharged.  Employees  in  the  export  in- 
dustry and  the  export  trades  have  also,  and  on  a  large  scale, 
been  set  at  liberty  to  engage  in  other  occupations,  and  have 
been  found  specially  fitted  for  bank-positions. 

There  exists  a  considerable  reserve  of  female  labor  in 
the  great  number  of  married  women  who  were  formerly  busi- 
ness employees;  during  the  war  these  women  have  been 
called  on  in  large  numbers  to  assist  in  industrial  occupa- 
tions. 

If  we  study  the  figures  showing  the  numbers  of  the  men 
and  women  members  of  the  sick-clubs,  we  gain  a  picture  of 
the  degree  in  which  female  labor  has  come  to  the  relief  of  the 
labor  market.  The  relative  numbers,  which  are  published  by 
the  ReicJuarbeitsblatt,  show,  for  the  men,  a  decline  in  1915 
from  100  to  86,  and  a  corresponding  increase  for  women  from 
loo  to  113.5.  On  January  ist,  1916,  the  report  showed 
4,747,613  men  and  4,019,564  women  members  of  the  sick- 
clubs.  In  absolute  numbers,  therefore,  the  women  members 
come  very  close  to  the  figures  for  the  men;  the  deduction  is 
reasonable  that,  as  regards  1915,  the  loss  of  man's  labor  was 
to  a  very  great  extent  made  good  by  an  additional  supply  of 
woman's  labor.  It  should  be  noted  that  the  prisoners  of  war 
are  not  members  of  the  sick-clubs,  and  that,  consequently,  the 
addition  to  male  labor  which  they  represent  is  not  taken  into 
account  in  the  sick-club  statistics. 

Juvenile  labor  has  also  been  employed  during  the  war  to  a 
greater  extent  than  formerly,  and  on  a  scale  large  enough  possi- 
bly to  occasion  serious  consequences.  Old  people,  too,  have 
been  obliged  to  quit  the  peaceful  existence  to  which  they  had 
retired,  and  once  more  engage  in  industrial  pursuits.  In  Berlin 
one  can  see  cabmen  who,  like  their  horses  and  their  vehicles, 


io       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

look  as  though  they  had  been  brought  out  from  some  museum 
of  antiquities. 

In  addition  to  all  this,  the  hours  of  work  in  all  branches 
where  it  has  become  necessary  to  make  the  change  are  now 
longer  than  before.  In  the  Government  offices  and  the  banks, 
in  business-offices  and  in  the  schools,  as  well  as  in  the  majority 
of  factories,  overtime  is  now  the  rule.  If  any  of  the  em- 
ployees are  absent  and  other  persons  cannot  be  had  to  take 
their  places,  the  work  must  be  done  by  extra  labor  on  the 
part  of  the  remainder, of  the  staff.  In  a  primary-school,  for 
instance,  the  men  teachers  are  absent  on  military  service; 
women  teachers  are  at  once  called  in  and  put  in  the  places  of 
their  colleagues.  Where  no  female  teachers  are  available  the 
remaining  staff  must  do  the  additional  work,  sometimes 
amounting  to  50  per  cent.,  in  order  to  keep  the  school  going. 
The  case  is  the  same  everywhere  else.  In  industrial  activities, 
overtime,  Sunday  and  night-shift  work  are  resorted  to  exten- 
sively. It  is  merely  necessary  to  read  the  report  issued  by 
the  Reichsarbeitsblatt  dealing  with  industrial  employment  to 
realize  the  extraordinary  extent  to  which  this  overtime  work 
now  prevails,  reports  of  overtime  work  in  one  form  or  other 
appearing  from  almost  every  branch  of  the  mining,  iron  and 
metal,  machine,  electric  and  chemical  industries. 

In  order  to  effect  these  sweeping  industrial  changes,  it  has 
been  necessary  to  suspend  the  regulations  restricting  the  work- 
ing hours.  If,  under  normal  conditions,  these  regulations  are 
of  use — a  matter  in  regard  to  which  there  is  hardly  any  dif- 
ference of  opinion  —  the  conclusion  must  be  drawn  that  the 
present  extension  of  the  working-time,  and  the  employment  of 
women  and  of  minors,  will  in  the  long  run  prove  incompatible 
with  a  healthy  and  economical  utilization  of  labor.  If  the 
war  continues  for  a  great  length  of  time,  the  present  intense 
labor  is  bound  to  have  injurious  results  in  one  way  or  another. 
At  present,  however,  this  point  of  view  is  entirely  lost  sight 
of  in  consideration  of  the  task  of  maintaining  the  economic 
life  of  the  nation  during  the  war.  This  problem  has  been 
solved  in  a  way  that  could  hardly  have  been  imagined  possible. 


THE   SUPPLY   OF   LABOR  II 

Of  course,  as  compared  with  what  it  was  before  the  war,  pro- 
ductive labor  has  really  diminished.  But,  by  the  productive 
work  of  the  soldiers  themselves  who  have  been  called  to  the 
colors;  by  the  adoption  of  the  plan  of  releasing,  altogether  or 
temporarily,  the  men  in  service  for  the  purpose  of  carrying 
out  important  work  in  civil  life;  by  the  productive  employ- 
ment of  the  prisoners  of  war;  by  the  use  of  women's  labor; 
by  the  extensive  employment  of  young  or  aged  persons,  and 
by  means  of  a  general  regime  of  overtime,  it  would  seem  as 
though  success  had  been  gained  in  the  struggle  to  maintain 
the  productive  capacity  of  the  nation  at  a  standard  not  very 
far  below  the  normal. 


THE  INDUSTRIES 

FROM  the  facts  given  in  the  preceding  chapter  concern- 
ing the  position  of  the  labor  market  in  Germany,  it 
may  be  deduced  that  the  greater  part  of  the  industries 
of  the  country  —  and  especially  those  occupied  in  supplying 
military  needs  —  are  as  busy  as  they  possibly  can  be,  taking 
the  labor  supply  into  account.  In  order  to  obtain  a  definite 
idea  of  the  work  done,  it  would  be  of  very  great  interest  to 
have  figures  showing  the  quantities  of  produce,  but  with  few 
exceptions,  such  figures  are  not  known.  Only  in  the  coal  and 
iron  industries  can  statistics  be  had  which  give  a  clear  picture 
of  the  condition  of  affairs. 

The  production  of  pig-iron  within  the  whole  of  the  German 
custom-district,  which,  during  1912,  amounted  to  almost 
1,500,000  tons  per  month  and  during  1913  to  somewhat  more 
than  1,600,000  tons,  underwent  a  very  considerable  reduction 
during  the  earlier  part  of  the  war,  but  has  since  shown  great 
improvement.  The  monthly  production,  which  fell  as  low  as 
586,700  tons  in  August,  1914,  and  580,100  tons  in  Septem- 
ber, 1914,  had,  in  the  December  of  the  same  year,  risen  to 
854,200  tons,  and,  in  July,  1915,  to  1,047,500  tons,  this  being 
about  two-thirds  of  the  normal.  A  comparison  between  the 
monthly  production  for  the  following  months  and  those  for  the 
corresponding  months  two  years  earlier  gives  this  result  (in 
thousands  of  tons)  : 

1913-14  1915-16 

July   1,646.9  1,047.5 

August 1,638.8  1,050.6 

September 1,589.2  1,034.1 

October   1,650.2  1,076.3 

November 1,587.3  1,019.1 

December    1,609.7  1,029.1 

January   1,566.5  1,078.4 

12 


THE   INDUSTRIES  13 

As  1913  was  a  record  year  as  far  as  pig-iron  production  is 
concerned,  we  cannot  be  far  wrong  if  we  say  that  the  produc- 
tion of  pig-iron  in  Germany,  since  the  middle  of  1915,  has 
been  two-thirds  of  the  normal.  The  monthly  production  even 
as  late  as  1908  was  somewhat  lower  than  1,000,000  tons,  not 
rising  above  the  million  mark  until  1909  —  excepting  only  the 
extraordinarily  productive  period  1906-1907.  The  existing 
decline  signifies,  therefore,  a  return  to  the  conditions  prevail- 
ing before  1909,  or,  if  the  reader  so  wishes,  to  the  high-water 
mark  of  1907.  During  the  twelve  months,  August  1914-July 
1915,  the  first  year  of  the  war,  the  total  production  of  pig- 
iron  was  10,121,500  tons.  At  the  present  rate,  the  yearly  pro- 
duction will  be  about  12,500,000  tons,  an  increase,  in  com- 
parison with  the  figures  for  the  twelve-months'  period  just 
mentioned,  of  23  or  24  per  cent. 

The  production  of  ingot  steel  in  January,  1916,  amounted  to 
1,227,100  tons,  as  compared  with  1,599,800  tons  in  January, 
1914.  It  is,  therefore,  about  three-quarters  of  the  normal.  In 
August,  1914,  it  fell  to  567,600  tons.  There  is,  therefore,  a 
considerable  increase  as  compared  with  the  first  critical  period. 

The  production  of  coal,  which,  in  1913,  reached  191,500,000 
tons,  amounted  in  1915  to  146,700,000  tons,  a  very  consider- 
able reduction.  The  production  of  brown  coal  (lignite),  on 
the  contrary,  had  risen  from  87,100,000  tons  in  1913  to 
88,400,000  in  1915.  The  total  production  of  coal  and  lignite, 
together,  shows  a  reduction  from  278,600,000  tons  in  1913,  to 
235,100,000  in  1915,  or  a  fall  of  15.6  per  cent.  The  total  pro- 
duction in  1911  amounted  to  234,200,000  tons.  The  war  has 
reduced  the  production  of  coal  to  about  the  amount  gained 
in  1911.  It  has,  so  to  say,  moved  the  hand  on  the  dial  of  de- 
velopment four  years  backwards.  Taking  into  consideration 
the  extraordinary  importance  that  the  production  of  coal 
possesses  for  all  German  industrial  life,  not  only  as  a  material 
factor  but  as  an  index  of  its  condition,  these  data  concerning  the 
actual  extent  of  the  decline  in  coal  production  are  deserving 
of  the  greatest  attention. 

In  comparison  with  the  critical  period  during  the  early  days 


14        GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

of  the  war,  the  present  production  of  coal  shows  a  very  con- 
siderable increase.  As  the  total  production  for  1914  is  given 
as  161,500,000  tons,  and  as  the  first  seven  months  were  marked 
by  a  fairly  normal  output  —  about  16,000,000  tons  per  month, 
or  a  total  of  110,700,000  tons  —  there  remain  for  the  last  five 
months  of  1914,  the  first  months  of  the  war,  50,800,000,  or 
about  10,000,000  tons  monthly,  which  is  less  than  two-thirds  of 
the  normal  production.  In  comparison  with  this,  the  average 
monthly  production  for  1915  shows  an  increase  of  fully  20 
per  cent. 

In  addition  to  Germany's  own  supplies  of  iron  and  coal,  we 
have  to  take  into  calculation  the  considerable  quantities  of 
these  minerals  present  in  the  parts  of  France,  Belgium  and 
Poland  occupied  by  the  German  forces,  and  which,  to  a  very 
considerable  extent,  are  now  being  mined  under  German  direc- 
tion. Consequently,  Germany  cannot  suffer  from  any  want  of 
these  minerals,  which  are  of  fundamental  importance  in  the 
manufacturing  industries.  Within  Germany  itself  the  produc- 
tion is  restricted  chiefly  by  the  want  of  laborers,  but  in  the 
occupied  districts  these  mining  industries  are  carried  on  for 
the  most  part  by  the  aid  of  foreign  labor. 

So  far  as  the  other  raw  materials  required  by  industries  are 
concerned,  the  position  is  by  no  means  so  favorable,  and  a 
considerable  scarcity  of  certain  important  raw  materials  exists. 
How  this  scarcity  has  been  made  good,  or  how  it  has  been 
possible  to  carry  on  work  with  the  limited  supply  available, 
is  a  chapter  of  the  very  greatest  interest.  As,  however, 
numerical  data  are  wanting,  and  for  easily  understood  reasons, 
measures  concerning  the  matter  have  not  been  made  public, 
only  a  few  general  and  very  incomplete  statements  can  be 
given  here,  although  these  should  be  sufficient  to  give  an 
approximate  idea  of  the  actual  condition  of  the  German 
industries. 

In  the  first  period  of  the  war,  the  greatest  interest  was 
attached  to  the  question  of  the  supply  of  copper.  Germany's 
native  production  of  this  metal  was  comparatively  unimportant, 
and  her  imports — -chiefly  via  the  Balkan  peninsula  —  were 


THE  INDUSTRIES  15 

probably  very  limited,  while,  on  the  other  hand,  the  manu- 
facturers of  munitions  demanded  large  amounts  of  the  metal. 
The  considerable  stock  of  copper  intended  for  industrial  pur- 
poses that  Germany  possessed  at  the  beginning  of  the  war, 
increased  by  that  which  was  made  available  by  the  occupation 
of  Belgium  and  the  north  of  France,  could  not,  in  the  long 
run,  satisfy  these  demands.  It  became  necessary  to  observe 
the  greatest  possible  economy  in  the  use  of  copper.  An  alto- 
gether wasteful  and  extravagant  use  had  been  made  of  the 
metal  previously  and  it  was  discovered  that,  to  a  very  great 
extent,  copper  could  be  replaced  by  steel  or  by  zinc.  During 
times  of  peace,  copper  had  been  employed  for  certain  purposes 
in  the  manufacture  of  ammunition,  because  steel  would  rust 
when  the  ammunition  was  kept  in  storage.  Now,  however, 
when  ammunition  is  made  for  immediate  consumption,  this 
reason  for  the  use  of  copper  is  eliminated.  By  means  of  new 
methods,  perfected  during  the  war,  for  the  manufacture  of 
zinc,  it  has  been  found  possible  to  produce  this  metal  in  such 
forms  that  it  can  be  drawn  into  wire  and  turned,  and  conse- 
quently it  can  be  used  instead  of  copper  both  in  the  electric 
industry  and  for  other  purposes,  especially  in  the  manufacture 
of  ammunition.  Zinc  is  now  employed  in  many  instances  in- 
stead of  copper  for  electric  wires,  and  such  progress  has 
already  been  made  that  entire  transformers  are  now  built  with 
zinc  instead  of  copper. 

Since,  by  the  occupation  of  Belgium,  Germany  gained  all 
the  supplies  of  zinc  she  needed,  she  has  been  to  a  very  essential 
degree  independent  of  her  customary  copper  supply.  It  has 
also  been  found  that  the  stock  of  copper  utensils  in  German 
households  forms  a  reserve  of  copper  of  an  extent  which  had 
not  been  even  imagined.  In  every  fairly  well-to-do  German 
home  there  was,  among  other  copper  utensils,  a  large  copper 
boiler  for  washing.  The  large  hotels  have  proved  very  rich 
in  copper.  Consequently,  when  a  demand  was  made  through- 
out Germany  for  all  copper  utensils,  an  enormous  supply  of 
the  metal  was  obtained.  All  this  copper  has  by  no  means  been 
sent  to  the  munition-factories,  but  has  been  stored,  and  forms 


16       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

a  considerable  reserve  of  the  metal.  Many  fixed  objects  of 
copper  of  large  size,  such  as  cisterns  and  the  like,  have  been 
called  for  and  will  be  probably  sent  in  during  the  course  of 
the  next  few  months.  These  requisitions  can,  as  need  de- 
mands, be  extended  to  copper  utensils  employed  in  industries ; 
the  breweries,  especially,  are  said  to  be  perfect  mines  of 
copper.  The  foreign  territories  occupied  will  also  send  their 
tribute.  Brass  and  bronze  can  be  used,  and  of  these  metals 
there  are  extraordinary  amounts  in  household  articles  and  in 
the  brass-mountings  which  have  been  employed  very  lavishly 
in  modern  buildings,  to  say  nothing  of  all  the  brass  that  has 
somewhat  unnecessarily  been  used  for  the  fittings  of  the  Ger- 
man railway-carriages.  From  these  facts  it  is  evident  that 
Germany  will  not  suffer  from  any  scarcity  of  copper,  and  in 
that  country  itself  the  general  opinion  is  that  the  copper  prob- 
lem has  been  satisfactorily  solved. 

Nor  does  there  seem  to  exist  any  lack  of  other  metals  that 
should  cause  any  anxiety.  There  is  not  the  same  demand  for 
nickel  as  before,  nor  for  manganese.  It  is  probable  that  Ger- 
many, so  far  as  her  demand  for  metals  is  concerned,  will,  for 
a  long  time,  be  fairly  independent  of  imports  because  of  her 
own  natural  supplies  and  the  large  stocks  in  hand.  The  coun- 
try has  sources  of  raw  material  to  which,  formerly,  no  atten- 
tion was  paid:  poor  ores,  stores  of  scrap-metal,  slag-heaps  — 
everything  is  now  being  made  use  of.  In  a  Belgian  mining 
works,  for  example,  large  stores  of  old  slag  were  found  which 
proved  to  contain  6-8  per  cent,  copper. 

There  exists  a  certain  scarcity  of  mineral  oils.  To  some 
degree  this  is  made  good  by  importing  from  Rumania  and 
Austria-Hungary.  Of  benzine,  which  Germany  usually  ob- 
tains from  Galicia  and  Rumania,  the  supplies  are  about  equal 
to  the  demand,  as  motor-car  traffic  appears  to  find  benzole  or 
spirit  sufficient  for  its  purpose.  Great  economy  has  to  be 
practiced  with  illuminating  oils,  but  very  much  has  been  done 
to  increase  the  employment  of  electric  and  gas  lighting;  that 
the  authorities  know  how  to  take  rational  measures  to  enforce 
necessary  economy  in  lighting  is  shown  by  the  new  regulation 


THE  INDUSTRIES  17 

which,  for  the  summer-time,  places  the  clock  in  advance  of  the 
real  time. 

In  the  manufacture  of  explosives,  Germany  is  not  hampered 
by  any  want  of  material.  The  development  and  use  of  coal 
tar  products  is  almost  Germany's  special  province,  so  that  she 
is  well  provided  with  all  the  important  substances  —  such  as 
toluol  —  which  are  needed  in  the  production  of  explosives. 
It  is  said  that  Napoleon's  campaigns  were  hindred  by  a  failure 
in  the  supplies  of  saltpeter.  No  such  scarcity  exists,  or  ever 
will  exist,  in  Germany,  since  the  problem  of  the  extraction  of 
nitrogen  from  the  air  has  been  solved  in  a  fully  satisfactory 
manner.  More  will  be  said  about  this,  in  the  chapter  on  agri- 
culture. Formerly,  cotton  was  important  in  the  manufacture 
of  explosives,  but  a  substitute  has  been  found  in  the  home- 
produced  cellulose.  There  can  be  no  question  of  any  scarcity 
of  material  in  this  line. 

That  branch  of  industry  in  which  Germany  might  be  ex- 
pected to  feel  most  severely  a  scarcity  of  raw  material  is  the 
clothing-industry.  The  textile  industry,  during  the  period 
immediately  preceding  the  war,  was  suffering  from  marked 
depression.  Large  stocks,  not  only  of  raw  materials,  but  of 
yarn  and  manufactured  products,  had  been  stored.  This  alto- 
gether abnormal  accumulation  of  stocks  proved  to  be  of  the 
greatest  service  during  the  war.  It  is  said  that  Bremen  — 
the  center  of  the  cotton-trade  of  Germany  —  had,  at  the  begin- 
ning of  the  war,  raw  cotton  in  storage  to  a  value  of  100  million 
marks  ($25,000,000).  Besides  this,  a  great  amount  of  cotton 
was  captured  in  Antwerp  and  other  places.  The  import  of 
cotton  from  America  was  for  some  time  unhindered  and  the 
opportunity  was  seized  to  pile  up  large  stocks  in  Germany. 
As  for  wool,  the  stocks  at  the  beginning  seem  to  have  been 
smaller  than  those  of  cotton,  but  that  want  was  soon  made 
good  by  the  stores  that  the  German  troops  found  in  the  manu- 
facturing towns  of  Belgium  and  the  north  of  France,  which 
are  considered  to  have  exceeded  Germany's  normal  yearly 
demand.  As  for  linen,  at  the  beginning  of  the  war,  the  coun- 
try possessed  large  stocks  which  were  rapidly  augmented  by 
what  was  taken  in  Belgium  and  in  Poland. 


1 8       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

After  the  first  confusion,  the  textile  industry  began  to  run 
in  its  usual  grooves,  and  for  three-quarters  of  a  year  the  mills 
worked  almost  exclusively  to  supply  military  needs.  During 
this  period  the  civil  market  was  supplied  from  the  stores  of 
previously  unsaleable  goods  which  proved  of  unexpected  help 
both  to  the  textile  industry  and  to  the  national  economy  of 
Germany.  Since  then  the  industry  has  had  time  to  work  to 
supply  civil  needs  and  to  manufacture  the  half-ready  goods 
which,  at  the  outbreak  of  the  war,  had  to  be  laid  aside. 

If  we  wish  to  form  an  idea  of  the  capacity  of  Germany  to 
hold  out  by  reckoning  her  supply  of  raw  goods  for  the  textile 
industry,  it  must  first  be  fully  understood  that  the  needs  of  the 
army  administration  for  textile  goods  are  already  very  well 
supplied  and  that,  to  judge  from  all  appearances,  the  military 
stores  now  lying  in  reserve  are  extraordinarily  large.  One 
proof  of  this  can  be  found  in  the  proclamations  that  have  been 
issued  to  prevent  further  offers  of  certain  textile  goods  such 
as,  for  example,  military  blankets.  The  statements,  too, 
respecting  the  condition  of  the  labor-market,  tend  to  show  that 
the  orders  given  by  the  army  administration  for  certain  articles 
are  beginning  to  diminish,  which  may  be  taken  as  a  sign  that 
the  demand  is  very  well  supplied.  If  close  attention  is  paid 
to  the  soldiers  one  meets  in  great  numbers  wherever  one  goes 
—  in  streets  and  restaurants,  in  trains  and  the  trams  —  one 
will  find  without  exception  that  they  are  very  well  dressed. 
Observing  the  men  on  leave  or  those  on  guard,  there  is  no  sign 
that  the  uniforms  are  being  worn  out  or  can  no  longer  be 
replaced  by  new  ones.  The  supply  of  articles  of  civil  wearing 
apparel  seems  to  be  equally  ample;  the  shop  windows  present 
their  usual  appearance  and  the  large  stores  are  full  of  goods 
and  purchasers.  The  reader  must  not  imagine  that  the  civil 
population  is  badly  dressed,  although  it  is  possible  that  an  eye 
better  trained  than  mine  to  note  deviations  from  the  latest 
fashions  might  be  able  to  discover  that  everything  is  not  quite 
"  up  to  date."  I  cannot  express  any  opinion  on  such  a  sub- 
ject, though  I  believe  that  persons  of  the  higher  classes  some- 
times, for  patriotic  reasons,  wear  their  clothes  for  a  longer 


THE   INDUSTRIES  1 9 

time  now,  during  the  war,  than  they  otherwise  would,  and  I 
cannot  but  wish  that  the  same  sound  conception  of  what  exist- 
ing conditions  demand  could  be  entertained  in  Sweden  too. 
But  from  what  one  sees  in  Germany,  one  absolutely  does  not 
obtain  any  impression  that  the  dress  of  the  population  has  in 
any  way  suffered  in  consequence  of  the  war.  This  opinion 
holds  good  for  all  classes  of  society.  Should  it  prove  neces- 
sary in  the  future  to  exercise  economy  with  regard  to  textiles, 
the  German  nation  has  a  very  extensive  limit  of  reserve  in 
the  clothes  that  are  being  worn  at  the  present  moment.  Any 
restriction  that  may  be  considered  necessary  in  the  consump- 
tion of  textiles  for  articles  of  pure  luxury  will  be  considered 
by  nobody  in  Germany  as  a  matter  of  serious  inconvenience. 

There  always  exist  in  the  domestic  economy  of  a  whole 
nation  very  large  stocks  of  textile  goods  for  which  there  is 
no  real  employment.  Clear  evidence  of  this,  in  respect  to 
woolen  goods,  was  borne  by  the  so-called  national  wool-week 
during  which,  it  is  said,  there  were  collected  by  means  of 
voluntary  gifts,  woolen  articles  to  a  value  of  from  $7,500,000 
to  $10,000,000.  Nor  is  Germany  entirely  devoid  of  natural 
resources.  As  the  Government  takes  all  the  wool  that  is  shorn 
within  the  country,  there  is  always  a  considerable  yearly  sup- 
ply to  count  on.  Wool  can  now  too  be  imported  from  the 
Balkan  peninsula  and  the  near  Orient.  In  order  to  increase 
the  supplies  of  textile  raw  material,  resort  has  been  made  to 
the  use  of  native  vegetable  fibers.  The  cultivation  of  flax  has 
been  increased,  and  plants  to  which  no  attention  had  hitherto 
been  paid  are  now  being  made  of  use.  The  nettle,  especially, 
seems  to  be  about  to  play  an  important  part,  and  large  mills 
are  already  engaged  in  the  manufacture  of  this  raw  material, 
wadding  and  sacking  being  some  of  the  articles  produced. 
Of  special  interest  are  also  the  attempts  made  to  employ  cellu- 
lose as  a  textile  material. 

What  has  been  said  about  textiles  probably  holds  good, 
approximately,  in  regard  to  leather  also.  Under  ordinary  cir- 
cumstances, Germany  exports  very  large  quantities  of  leather 
(about  45,000,000  Ibs.)  and  of  manufactured  leather  goods 


2O       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

(about  22,500,000  Ibs.),  but  to  maintain  this  trade  she  has  to 
import  a  great  number  of  hides.  Where  the  greater  part  of 
the  raw  material  for  any  trade  is  obtained  from  other  parts  of 
the  world,  there  always  exists  a  comparatively  large  reserve 
stock;  the  German  leather  trade  is  said  to  have  had  a  very 
considerable  supply  on  hand  when  the  war  broke  out.  In 
addition,  Germany  possesses  great  natural  resources  in  her  great 
wealth  of  cattle.  At  present,  no  exterior  signs  of  a  scarcity  of 
leather  goods  can  be  observed.  The  boot-shops  exhibit  just  as 
many  shoes  as  usual,  and  prices  do  not  seem  extravagantly 
high.  Even  on  closest  scrutiny,  not  the  least  sign  of  want  of 
foot-wear  for  the  population  can  be  discovered.  In  one  pri- 
mary school  in  a  rather  poor  quarter  of  Berlin,  I  paid  special 
attention  to  the  children's  boots.  I  saw  only  one  child  with 
bad  shoes;  two  were  wearing  wooden  shoes,  but  the  rest  had 
excellent  foot-wear.  I  do  not  believe  a  better  condition  would 
be  found  if  a  similar  examination  were  made  in  a  secondary 
school  in  Sweden.  I  need  hardly  say  that  the  foot-wear  of 
the  army  gives  the  observer  no  opportunity  whatever  for 
adverse  criticism. 

It  is  probable  that  the  scarcity  of  rubber  is  pretty  severely 
felt.  It  is  true,  artificial  caoutchouc  is  made  by  a  synthetical 
process.  If  the  product  is  not  perfect  as  a  material  for  motor- 
car tires,  probably  it  can  be  very  well  used  for  insulating  pur- 
poses, and  this  means  a  considerable  saving.  The  military 
motor-car  traffic  is  very  extensive,  and  there  are  cars  in  civil 
use,  too,  although  in  limited  numbers. 

German  industries  have  been  compelled  to  undergo  an 
extraordinarily  radical  transformation,  caused  by  the  needs 
and  conditions  brought  about  by  the  war.  It  has  been  neces- 
sary to  do  without  an  export  of  industrial  goods  amounting  to 
hundreds  of  millions  of  money,  and  in  the  home  markets  de- 
mand for  many  articles  has  greatly  lessened.  New  tasks  have 
been  laid  on  industrial  production.  We  have  seen  something 
of  the  manner  in  which  labor  and  materials  for  production 
have  been  procured,  and  of  the  extent  to  which  this  has  been 
done.  What  remains  to  be  described  is  the  solution  of  the 
problem  of  adapting  the  industries  to  their  new  tasks. 


THE   INDUSTRIES  21 

The  story  of  this  adaption  is  extremely  interesting  and  when 
its  history  at  last  comes  to  be  written,  an  entirely  new  light 
will  be  thrown  on  the  adaptability  of  modern  industrial  enter- 
prises. What  people  in  Germany  are  fond  of  asserting  may 
be  true:  that  business  men  in  that  country  are  more  than 
usually  capable  of  adapting  themselves  to  circumstances.  But 
an  explanation  of  how  such  thorough  and  rapid  alterations 
could  be  carried  out  at  all  is  certainly  to  be  found  in  the  highly 
scientific  management  nowadays  employed  in  industrial  pro- 
duction. The  foundation  of  this  production  is  the  machine 
industry  which  has  attained  an  extraordinarily  high  degree  of 
perfection  in  Germany.  This  industry,  carried  on  in  normal 
times  chiefly  for  export  trade,  has  been  adapted  in  a  very 
short  time  to  meet  the  demand  for  new  machines  necessitated 
by  the  transformation  of  production.  Whatever,  and  however 
widely  different,  the  purposes  may  be  for  which  machines  are 
intended,  they  consist  essentially  of  fairly  similar  component 
parts,  all  produced  by  the  machine  shops.  The  transforma- 
tion that  has  been  required  of  the  machine  industry  itself  has, 
consequently,  not  offered  any  very  special  difficulties.  The 
entire  mechanical  industry,  electric  works,  inclusive,  possesses 
large  masses  of  machinery  which  can  be  adapted  for  other  pro- 
duction than  the  normal.  A  modern  factory  consists  pri- 
marily of  large,  well-lighted  premises,  with  room  for  the 
erection  of  machinery  and  with  suitable  driving-power  for  it. 
If  it  be  desired  to  employ  such  a  factory  for  new  purposes, 
little  more  is  needed  than  to  move  the  old  machinery  and 
replace  it  by  new. 

Such  alterations  have  been  carried  out  very  extensively  by 
German  industries  during  the  war.  Factories  hitherto  de- 
voted to  specialties  of  one  branch  have  applied  themselves  to 
the  manufacture  of  other  specialties  in  the  same  branch  of 
more  service  for  military  purposes.  Manufacturers  of  lace, 
for  example,  have  turned  their  activities  to  the  making  of 
bandaging  material.  At  the  beginning  of  the  war,  a  large 
maker  of  furniture  stuffs  found  himself  in  a  most  unpleasant 
predicament;  he  had  in  his  possession  a  large  and  valuable 


22        GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

stock  which  he  was  quite  unable  to  sell.  He  made  a  desperate 
resolution,  tore  all  his  stuffs  to  ribbons  and  made  quilts  of 
them  which  he  sold  to  the  military  authorities.  He  then 
moved  out  his  machines  and  replaced  them  by  new  ones. 

There  are  also  factories  that  have  changed  the  character  of 
their  productions  completely,  manufacturing  ammunition  in- 
stead of  chocolate  and  sweets.  The  head  of  one  of  the  prin- 
cipal industrial  establishments  in  Germany  informed  me  that 
the  old  plant  in  his  works  had  almost  entirely  been  replaced 
by  new  machinery  and  the  character  of  the  production  alto- 
gether altered,  so  that  it  might  be  of  assistance  in  the  manu- 
facture of  ammunition.  I  asked  how  this  could  be  possible 
from  an  economic  point  of  view.  The  answer  was  that  the 
cost  of  the  new  machinery,  or  parts  of  machines,  was  being 
amortized  by  the  price  obtained  for  the  products.  And  such 
amortization  is  carried  out  with  great  rapidity.  In  conse- 
quence of  the  unheard  of  amount  of  work  done  under  the 
present  circumstances,  the  machinery  is  worn  out  in  a  very 
short  time  and  at  the  works  mentioned  the  new  machines  had 
already  been  replaced  several  times  over  by  fresh  sets.  When 
the  war  is  ended,  consequently,  the  temporary  plant  will  have 
been  paid  for,  and  no  loss  caused  to  the  establishment.  For 
the  national  economy,  this  simply  means  that  the  cost  of  the 
machinery  required  for  the  manufacture  of  ammunition  is 
included  in  the  current  expenses  of  the  war. 

An  interesting  question  that  necessarily  presents  itself  in  this 
connection  is :  how  is  it  possible  to  obtain  workmen  able  to 
execute  the  absolutely  new  kind  of  labor  that  is  thus  de- 
manded? The  explanation  I  received  from  a  large  employer 
was  as  follows:  Modern  machinery  for  the  production  of 
implements  had  reached  an  extraordinary  degree  of  precision 
and  nowadays  performs  its  work  with  the  most  minute  exact- 
ness. As  a  result,  the  various  parts  that  are  to  be  put  together 
fit  each  other  exactly,  and  no  adjustment,  no  filing,  or  addition, 
is  necessary.  It  was  just  this  fitting  which,  under  the  old  con- 
dition of  things,  required  the  attention  of  an  extremely  skilled 
mechanical  workman,  but  now  such  work  has  become  super- 


THE   INDUSTRIES  23 

fluous.  The  putting  together  of  the  several  parts  is  now  a 
purely  mechanical  process,  which  is  soon  learned.  Another 
result  of  this  accuracy  in  construction  is  that  the  manufactur- 
ing of  the  various  parts  of  a  complicated  piece  of  mechanism 
can  be  distributed  among  a  number  of  work-shops,  thereby 
including  such  small  factories  as  are  provided  with  machinery 
adapted  only  for  some  special  detail  of  the  work,  so  that  these 
shops  as  well  can  be  employed  as  a  link  in  the  great  chain  of 
the  production  of  war  material. 

If,  on  the  basis  of  what  has  been  said  above,  we  endeavor 
to  form  a  general  idea  of  the  position  of  German  industries 
during  the  war,  we  cannot  but  conclude  that  they  are  being 
carried  on  as  near  normally  as  the  supply  of  available  labor 
permits.  There  is  no  lack  of  premises  possessing  driving- 
power,  transport  arrangements,  etc. ;  mechanical  industry  at- 
tends in  an  absolutely  sufficient  degree  to  the  manufacture  of 
machinery  and  implements  for  the  new  production;  scarcity 
of  raw  material  does  not  make  itself  felt,  or  at  least,  not  to 
such  a  degree  as  to  lead  to  the  cessation  of  any  necessary 
manufacture.  The  restricted  supply  of  labor  is  the  chief 
factor  in  limiting  the  scope  of  the  industries;  all  that  is  in- 
cluded in  the  term  "  capital,"  in  the  concrete  sense  of  the  word, 
exists  to  the  degree  required  by  the  industries  as  now  employed 
and  with  the  given  limitation  of  their  tasks.  As  far  as  can 
be  seen  —  for  one  must,  of  course,  make  reservations  in  regard 
to  fields  of  labor  of  which  it  is  impossible  to  obtain  any  in- 
formation—  this  state  of  affairs  is  based  on  such  conditions 
that  it  can  be  maintained  for  a  very  long  time  to  come,  and 
even  in  regard  to  some  aspects,  for  an  unlimited  period. 

The  period  of  transition  from  the  former  normal  to  the 
present  military  organization  was,  of  course,  attended  by  very 
considerable  difficulties.  This  period  of  transition  was  char- 
acterized by  a  considerable  want  of  employment,  by  an  incom- 
plete utilization  of  the  national  powers  of  production  in  gen- 
eral. To  judge  by  the  figures  showing  the  scope  of  this  non- 
employment,  this  period  of  transition  lasted  about  two-thirds 
of  a  year.  The  disorganization  during  this  period  occasioned 


24       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

very  considerable  losses.  To  this  should  be  added  the  not 
unimportant  initial  costs  —  incurred  but  once,  of  course  —  for 
the  transformation  of  the  production.  If  we  take  all  this  into 
consideration,  industrial  Germany,  now  that  it  has  once  grown 
accustomed  to  the  new  order  of  things,  should  prove  more 
productive  than  during  the  first  year  of  the  war,  and  this  in- 
crease should  be  large  enough  to  more  than  neutralize  that 
increase  in  difficulties  which  the  continuation  of  the  war  must, 
quite  naturally,  cause.  This  deduction  is  undeniably  supported 
by  the  figures  given  above,  showing  the  increase  in  the  pro- 
duction of  pig-iron  and  coal,  as  compared  with  the  amounts 
obtained  during  the  earlier  critical  period. 


AGRICULTURE 

IN  the  endeavor  to  form  an  opinion  of  Germany's 
economic  power  of  resistance,  it  is  of  first  importance 
to  comprehend  clearly  the  extent  to  which  the  agricul- 
ture of  that  country  can  be  maintained  at  its  former  level,  or 
eventually  be  made  to  increase  its  capacity  of  production  dur- 
ing the  war.  In  the  matter  of  human  labor,  the  reply  has 
already  been  given  in  as  great  detail  as  possible.  Thanks  to 
the  work  performed  by  women  and  children,  and  to  the  assist- 
ance received  from  the  prisoners  of  war,  it  seems  that,  aided 
by  the  favorable  weather  conditions  of  the  past  winter,  which 
permitted  a  certain  amount  of  plowing  to  be  carried  on  into 
the  month  of  January,  it  has  been  possible  to  maintain  agricul- 
ture on  a  fair  level.  In  addition  to  the  regular  farm  work, 
market  gardening  is  being  carried  out  since  the  war  by  other 
than  agricultural  laborers,  and  on  parcels  of  land  that  have 
hitherto  lain  uncultivated.  This  additional  work,  if  regarded 
in  detail,  may  appear  insignificant,  but  still  it  contributes  to  a 
very  considerable  degree  to  the  solution  of  the  problem  of  ob- 
taining the  necessaries  of  life  for  innumerable  families. 

As  to  the  increase  in  the  area  of  land  under  cultivation,  there 
must  also  be  taken  into  consideration  the  great  extent  of 
enemy  country  occupied  by  the  German  troops,  especially  the 
north  of  France  and  Courland,  where  the  productive  capacity 
of  the  soil  is  considerably  in  excess  of  the  needs  of  the  remain- 
ing population.  Courland,  which  was  almost  denuded  of  its 
population  by  the  Russians,  but  which  has  been  systematically 
cultivated  by  the  Germans,  will,  in  1916,  make  a  by  no  means 
contemptible  contribution  to  the  food  supplies  of  Germany. 
The  extension  of  the  cultivation  of  bogs,  of  which  great  expec- 
tations were  at  first  formed,  has  turned  out  to  be  of  compara- 
tively little  value  because  of  the  scarcity  of  labor. 

25 


26       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

In  addition  to  labor  and  land,  agriculture,  like  industrial 
production,  also  needs  certain  raw  materials.  These  are,  in 
the  first  place,  artificial  manures  —  potash,  phosphorus  and 
nitrates.  So  far  as  potash  is  concerned,  Germany  is  exceed- 
ingly well  provided,  supplying  in  times  of  peace  not  only  her 
own  needs  in  this  respect  but  those  of  a  great  part  of  the 
remainder  of  the  world,  so  that  even  should  there  be  a  decline 
in  the  production  of  this  manure  there  would  still  be  enough 
to  satisfy  home  wants.  The  demand  for  phosphorus  is  filled, 
under  ordinary  circumstances,  by  imported  phosphates  and  by 
Thomas-phosphates,  the  latter  obtained  in  the  basic  produc- 
tion of  steel.  Of  natural  phosphate  of  lime  there  were  im- 
ported during  the  years  immediately  preceding  the  war  more 
than  900,000  tons,  chiefly  from  North  America  and  the  north 
of  Africa.  On  the  other  hand,  superphosphates  were  exported 
in  considerable  quantities.  The  Belgian  phosphates  now  ob- 
tainable are  poor  in  comparison  and  cannot  fill  the  demand. 
Of  Thomas-phosphate,  however,  there  appears  to  be  no  real 
scarcity ;  although  the  production  of  pig-iron  and,  consequently, 
that  of  Thomas-slag,  has  fallen  off,  the  export  of  Thomas- 
phosphate,  which  under  normal  conditions  was  quite  consid- 
erable, has  diminished.  Still  it  is  probable  that,  during  the 
war,  German  agriculture  suffers  from  a  scarcity  of  phosphate 
fertilizer.  This  scarcity  is  made  good  to  some  degree  by 
manuring  with  bone-powder.  All  bone  is  now  utilized  with 
far  greater  care  than  formerly,  and  is  employed  for  the  pro- 
duction of  glue  and  bone-powder. 

Nitrogen  manures  are  also  not  abundant.  Of  Chili  salt- 
peter, Germany  imported  net  about  750,000  tons  in  1913,  of  a 
value  of  approximately  $41,250,000.  To  make  up  for  this, 
Germany  has  devised  and  perfected  certain  methods  for  the 
utilization  of  atmospheric  nitrogen.  The  important  firm  of 
Badische  Anilin  und  Sodafabrik  now  produces,  by  the  aid  of 
the  method  described  by  Haber,  ammonia,  ammonia-sulphate 
and  sodium  nitrate  (Chili  saltpeter),  while  newly  established 
works,  in  which  the  German  state  is  a  specially  interested 
partner,  produces  calcium  nitrogen.  The  ammonium  sulphate 


AGRICULTURE  2? 

of  the  Baden  factories  is  very  suitable  for  manure,  and  easy 
to  spread.  An  inconvenience  attached  to  the  use  of  the  cal- 
cium nitrogen  is  that  it  is  very  dusty.  Consequently,  it  is 
mixed  with  a  little  damp  sawdust  when  it  is  to  be  spread  by 
hand.  These  manufactures  have  long  since  passed  the  experi- 
mental stage,  and  are  already  being  conducted  on  a  very  large 
scale.  The  production  is  so  satisfactory  from  an  economic 
point  of  view  that  it  will  be  able  to  compete  with  imported 
manures  when  peaceful  conditions  return.  Indeed,  the  Ger- 
mans consider  that  they  will  then  be  able  to  do  without  the 
former  large  importation  of  Chili  saltpeter.  At  present,  the 
manufacture  of  ammunition  makes  such  great  demands  on 
the  saltpeter  compounds  that  in  spite  of  the  vast  progress 
made  in  their  production  the  supplies  of  nitrogenous  manures 
for  agriculture  are  still  somewhat  limited.  Still,  the  develop- 
ment of  the  new  production  of  nitrogenous  compounds  seems 
so  rapid,  that  even  as  early  as  next  autumn  there  will  probably 
exist  considerably  greater  facilities  for  the  production  of  an 
ample  supply  of  the  necessary  manures. 

I  have  asked  various  agricultural  experts  what  effect  the 
scarcity  of  mineral  manures  may  have  on  the  1916  harvest. 
They  pointed  out  that  the  land  in  Germany  had  been  well 
fertilized  for  years  and  that  it  may  be  said  to  possess  some 
reserve  capital  in  this  respect,  so  that  a  certain  scarcity  in  the 
amount  supplied,  especially  of  phosphoric  acid,  for  a  period  of 
a  year  or  two,  would  not  have  any  very  great  effect  on  the 
harvest.  A  deficiency  in  nitrogenous  manures  would  be  a 
more  serious  matter,  but  it  will  prove  easier  to  make  good  such 
deficiency.  At  all  events,  this  scarcity  of  mineral  manures  is 
of  far  less  importance  than  the  character  of  the  weather  pre- 
vailing during  the  year.  The  weather  was  very  bad  during 
1915,  and  the  harvest  was  considerably  below  the  average; 
the  crops  of  oats  and  barley  especially  were  in  some  localities 
a  total  failure.  There  is  no  very  great  probability  that  such 
unfavorable  weather  conditions  will  be  repeated,  and  experts 
in  Germany  are  of  the  opinion  that  if  atmospheric  conditions 
are  at  all  normal  the  harvest  of  1916  may  be  expected  to  be 


28       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

considerably  better  than  that  of  the  preceding  year.  There 
exists  direct  reason  to  hope  for  such  a  result,  for  the  winter 
in  Germany  has  been  rich  in  moisture,  so  that  the  earth  has 
regained  that  normal  water-percentage  in  the  deeper  strata  of 
the  soil  which  has  really  been  wanting  for  a  succession  of 
years.  Experts  in  various  parts  of  Germany  told  me  that  they 
regarded  this  as  most  propitious  circumstance  for  the  harvest 
of  1916. 

Among  other  material  required  by  German  agriculture  under 
normal  circumstances,  a  prominent  position  is  occupied  by  the 
fodder  stuffs  obtained  from  abroad.  Of  fodder  barley  there 
was  imported  during  1913  somewhat  more  than  3,000,000  tons, 
and  of  maize  a  little  more  than  900,000  tons,  In  addition  to 
this  oil-cake  and  bran  were  imported.  Altogether,  the  average 
imports  of  fodder  stuffs  is  put  at  about  6,000,000  tons.  There 
can  be  no  doubt  but  that  the  cutting  off  of  this  importation 
causes  German  agriculture  difficulties,  which  have  been  over- 
come chiefly  by  feeding  the  cattle  with  potatoes  and  sugar. 

The  cultivation  of  the  potato  in  Germany  is  carried  out 
very  extensively,  an  average  harvest  being  estimated  at  about 
45,000,000  tons.  Of  this  less  than  one  third,  or  about  14,000,- 
ooo  tons,  are  required  for  the  food  of  the  population.  The 
remainder  is  used  as  fodder,  for  the  manufacture  of  brandy  and 
motor-spirit  and  for  other  purposes,  and  nothing  is  said  to  be 
actually  wasted.  The  potato  harvest  of  1914  amounted  to 
45,600,000  tons,  about  the  normal  quantity.  That  of  1915  is 
said  to  have  exceeded  50,000,000  tons,  and  was  a  considerable 
contribution  towards  making  good  the  deficit  in  fodder.  By 
carefully  economizing  the  supply  of  potatoes,  and  by  restrict- 
ing the  quantity  employed  for  the  manufacture  of  spirits,  a 
still  larger  amount  can  be  made  available  for  feeding  cattle. 
In  addition,  it  ought  to  be  quite  as  possible  for  Germany  as  for 
Sweden  to  produce  sulphite  spirit  from  wood,  which  would 
leave  a  considerable  quantity  of  potatoes  available  for  fodder. 
As  Germany's  large  sugar  export  has  practically  ceased  during 
the  war,  another  addition  of  great  value  to  the  food  economy 
of  the  country  is  obtained. 


AGRICULTURE  2Q 

However,  Germany  has  not  restricted  herself  to  these  meas- 
ures but  with  extraordinary  energy  has  endeavored  to  discover 
new  means  of  producing  substitutes  for  the  deficiency  in  the 
fodder  supply,  and  practical  results  have  already  been  attained. 
Among  them  may  be  mentioned  the  new  method  of  utilizing 
the  nutritious  substances  in  straw,  by  the  manufacture  of 
straw-meal.  Straw  contains  the  same  alimental  substances  as 
the  ear,  and  by  means  of  a  chemical  process  and  by  grinding 
the  straw  to  fine  meal,  the  substances  can  be  utilized.  The 
method  has  already  passed  the  experimental  stage,  and  it  is 
calculated  that  from  the  straw  crop  for  1916  a  very  consider- 
able amount  of  straw-meal  can  be  gained.  In  April,  1916,  ten 
factories  were  to  be  ready  to  begin  the  manufacture  of  this 
new  straw  food.  By  means  of  a  similar  method  it  would  seem 
as  though  a  solution  had  been  found  for  the  problem  of  utiliz- 
ing the  nutritious  substances  in  heather,  the  young  shoots  of 
which  are  ground  to  meal.  The  process  has  reached  such  a 
degree  of  development  that  large  masses  of  heather  are  im- 
ported from  places  so  distant  as  Sweden.  Experiments  to  the 
same  end  are  being  made  with  other  plants,  such  as  sea-weed 
and  the  refuse  of  vines,  and  it  is  said  that  large  quantities  of 
sea-weed  have  been  brought  from  Scania,  in  the  south  of  Swe- 
den. 

Great  efforts  have  been  made  to  produce  albuminous  fodder 
substances.  The  Delbrueck  method  of  gaming  albumen  from 
ammonia  with  the  aid  of  blastomycetes  is  very  generally  spoken 
of,  and  the  albumen  thus  obtained  can  be  perfectly  assimilated 
by  the  human  organism.  By  adding  a  small  quantity  of  such 
albumen  to  straw-meal,  a  fodder  substance  is  obtained  which 
is  stated  to  possess  20  per  cent,  more  nutritive  value  than  oats. 

It  has  also  been  discovered  that  the  direct  addition  of  am- 
monia to  the  fodder  of  horned  cattle  results  in  a  greater  econ- 
omy of  albumen  within  the  animal's  body,  this  implying  a  sav- 
ing in  the  amount  of  albuminous  fodder  required.  Authorities 
do  not  seem  unanimous,  however,  as  to  which  of  these  methods 
is  the  more  advantageous. 

In  the  production  of  substitutes   for  fodder,  considerable 


30       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

progress  has  been  made  and  the  development  of  new  methods 
is  proceeding  very  rapidly.  There  is  every  reason  to  expect 
that  next  winter  the  former  deficiency  in  fodder  will  to  no 
slight  degree  have  been  made  good  by  means  of  material  which 
was  not  formerly  available. 

Besides  all  this,  we  must  consider  the  systematic  economy 
observed  with  the  fodder,  and  the  extraordinary  care  that  is 
taken  to  utilize  the  waste  from  all  kinds  of  food.  Considering 
the  waste  of  which  domestic  economy  is  guilty  in  this  respect, 
the  reserve  of  fodder  material  to  be  obtained  from  this  source 
must  be  rather  great. 

A  not  unimportant  improvement  in  the  providing  of  Ger- 
many with  fodder  stuffs  has  been  gained  by  the  opening  of 
traffic  on  the  Danube,  and  by  the  large  quantities  of  fodder 
which  since  that  event  have  been  purchased  from  Rumania. 
The  purchases  made  in  March,  1916,  were  of  such  scope  that 
prime  importance  must  be  ascribed  to  the  transaction,  espe- 
cially in  the  matter  of  the  import  of  maize.  The  fodder  stuffs 
which  will  be  transported  to  Germany  as  a  result  of  this  agree- 
ment will  facilitate  the  solution  of  the  problem  of  preserving 
the  stock  of  pigs  in  the  country.  Rumania  and  Bulgaria,  un- 
der normal  conditions,  enjoy  a  surplus  harvest  which  will  go 
a  long  way  towards  covering  the  shortage  in  German  supplies. 
If  communications  between  the  countries  can  be  kept  regularly 
open,  Germany  will  hardly  run  any  risk  of  a  great  scarcity 
of  the  necessaries  of  life,  even  if  the  war  should  last  many 
years.  But  Germany  does  not  place  her  reliance  on  such  a 
supply;  she  is  taking  measures  to  make  her  own  resources 
sufficient  for  her  most  indispensable  needs. 

It  is  very  difficult,  not  to  say  impossible,  to  discover  without 
a  detailed  investigation  how  far  the  fodder  supplies  that  can 
with  any  tolerable  amount  of  certainty  be  considered  as  at  the 
command  of  the  country  will  be  able  to  satisfy  the  demand. 
The  safest  opinion  would  be  based  on  the  fact  that  Germany, 
who  has  now  been  for  more  than  a  year  and  a  half  cut  off 
from  her  usual  imports  of  fodder  stuffs,  has  so  far  succeeded 
in  overcoming  the  resulting  difficulties.  There  are  several  cir- 


AGRICULTURE  3! 

cumstances  that  point  to  Germany's  supply  of  such  fodder  be- 
ing more  abundant  next  winter  than  at  any  preceding  period 
of  the  war.  In  the  first  place  it  may  be  taken  for  granted 
that  the  oat  and  barley  harvest  will  be  about  normal  and  con- 
siderably in  excess  of  last  year's.  Great  progress  will  have 
been  made  undoubtedly  in  the  production  of  substitute  mate- 
rials; greater  economy  will  have  been  exercised  as  regards 
existing  means,  and  supplies  will  be  received  from  the  south- 
east of  Europe.  There  is  every  prospect  that  Germany  will 
ride  out  next  winter  with  even  greater  success  than  she  did 
last.  During  the  summer,  the  problem  will  be  an  easier  one, 
as  then  the  cattle  are  out  grazing.  In  the  west  and  south  of 
the  country,  this  favorable  period  begins  as  early  as  March, 
when  cattle  can  be  seen  in  the  meadows.  By  the  end  of  Febru- 
ary, or  the  middle  of  March,  1916,  Germany  had  probably 
passed  the  most  difficult  part  of  her  fodder  troubles. 

The  scarcity  of  fodder  stuffs  has  chiefly  made  itself  felt 
by  a  considerable  decline  in  the  milk  supply;  the  falling-off, 
it  is  said,  has  amounted  to  about  33  per  cent.  There  has  also 
been  a  decline  in  the  numbers  of  horned  cattle,  but  only  to  a 
very  limited  extent.  The  number  of  horned  cattle,  which  in 
December,  1913,  amounted  to  20,994,000,  had,  by  December  I, 
1914,  risen  to  21,817,000.  On  October  I,  1915,  the  number 
was  considered  to  be  still  above  20,000,000. 

The  stock  of  horned  cattle  in  Germany  normally  allows  of  a 
very  considerable  meat  supply  annually.  In  1912,  no  less  than 
3,703,000  cattle  more  than  3  months  old,  in  addition  to  4,454,000 
younger  calves,  were  slaughtered.  There  is  a  report  from 
1899  giving  the  number  of  calves  born  in  that  year  as  7,616,000. 
A  decline  of  one  or  two  millions  in  the  number  of  stock 
does  not  signify  any  actual  danger  for  Germany's  agricultural 
economy.  Oxen  and  old  cows  only  are  slaughtered,  so  that 
the  production  of  calves  will  not  suffer.  The  decrease  caused 
can  be  made  good  in  a  very  short  time,  when  once  there  is  a 
sufficient  supply  of  fodder  available. 

Of  horses,  Germany,  on  December  I,  1912,  possessed 
4,523,000.  On  December  i,  1915,  the  total  number,  exclusive 


32       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

of  "army  horses,"  was  given  at  3,441,000.  Even  at  that 
period,  the  number  of  horses  available  for  agricultural  pur- 
poses was  comparatively  little  reduced.  Since  the  latter  date, 
however,  a  larger  number  of  horses  has  probably  been  called 
for.  The  number  of  horses  killed  was,  we  may  suppose,  con- 
siderable during  that  period  of  the  war  when  the  armies  were 
more  in  motion,  but  there  appears  to  be  but  little  loss  in  the 
trench  warfare.  In  addition,  there  are  large  "  horse-hospitals  " 
behind  the  front,  employing  all  the  means  known  to  modern 
surgery  for  the  purpose  of  making  the  animals  serviceable 
again  and  the  results  are  said  to  be  very  favorable,  a  number 
of  invalid  horses  having  returned  to  agricultural  work  again. 
As  Prussia  alone  produces  150,000  foals  yearly,  the  annual 
fresh  supply  of  horses  bred  in  the  whole  of  Germany  can 
probably  be  put  at  300,000.  This  natural  increase  in  the  stock 
of  horses  should  contribute  in  no  inconsiderable  degree  to 
make  good  the  losses  caused  by  the  war.  It  is  likely  that 
some  compensation  has  been  obtained  by  imports,  the  occu- 
pation of  Belgium  having  been  probably  a  great  help  in  this 
respect.  However,  the  total  number  of  horses  in  Germany, 
as  far  as  I  can  learn,  must  now  be  considerably  less  than  the 
normal  stock.  One  result  of  this  is  that  the  demand  for 
fodder  is  also  less.  Horses  for  the  plow,  and  other  traction- 
work,  have  been  in  part  replaced  by  motor  power  —  which  has 
come  more  widely  into  use  during  the  war  —  and  also,  by 
cows.  These  animals  were  employed  in  some  places  as  beasts 
of  burden  even  before  the  war,  but  to-day  they  form  a  very 
considerable  and  important  reserve  of  traction  power  in  the 
service  of  agriculture. 

The  stock  of  pigs  is  one  of  special  importance  for  the  fod- 
der situation  of  Germany.  On  December  i,  1912,  the  num- 
ber of  pigs  was  21,924,000,  but  by  December  i,  1913,  it  had 
risen  to  25,659,000,  this  number  falling  by  December  i,  1914, 
to  25,339,000,  a  very  inconsiderable  decline.  Anxiety  caused 
by  the  scarcity  of  fodder  led  to  a  determination  to  reduce  the 
stock,  and,  in  the  spring  of  1915  there  was  carried  out  the 
measure  which  in  Germany  is  commonly  termed  "  the  mas- 


AGRICULTURE  33 

sacre  of  the  pigs,"  whereby  the  stock  was  reduced  to  16,570,000 
(15  April,  1915).  Later  on  it  seemed  to  many  that  this 
measure  had  been  a  hasty  one,  and  every  step  was  taken  to 
increase  the  stock  again.  On  October  I,  1915,  the  number  of 
pigs  is  said  to  have  risen  to  19,228,000.  In  order  to  be  abk 
to  form  a  correct  idea  of  the  meaning  of  these  figures  it  should 
be  remembered  that  about  24,000,000  pigs  were  slaughtered  in 
Germany  in  1912,  i.e.,  actually  more  than  the  number  surviv- 
ing on  December  i  of  the  same  year.  The  natural  increase 
of  these  animals  is  exceedingly  rapid,  and  even  so  very  con- 
siderable a  reduction  of  the  stock  as  may  be  necessary  during 
the  war  in  consequence  of  the  want  of  fodder  will  probably 
have  no  fatal  results  in  future. 

In  addition  to  the  above  mentioned  classes  of  cattle,  Ger- 
many possesses  about  5,500,000  sheep  and  3,500,000  goats. 
In  the  matter  of  cattle,  therefore,  Germany  is  very  well  pro- 
vided for,  especially  from  the  point  of  view  of  meat  produc- 
tion. Germany's  extraordinary  large  stock  of  pigs  absolutely 
insures  her  meat  supply,  for  none  of  the  other  large  European 
countries  is  even  approximately  as  well  supplied  as  Germany 
in  this  respect.  A  certain  reduction  of  the  stock  of  cattle  can 
be  effected  in  Germany  without  any  great  risk. 


SUPPLY  AND  DEMAND  OF  COMMODITIES 

AFTER  this  rapid  survey  of  conditions  in  the  most  im- 
portant branches  of  national  production  and  the  re- 
sources at  disposal,  the  question  remains:  To  what 
degree  is  German  production  able  to  supply  the  needs  of  the 
population,  and  what  are  the  prospects  of  this  supply  being 
maintained  should  the  war  continue  for  a  long  time?  As  to 
the  question  of  the  food  supply,  without  discussing  the  psycho- 
logical side  of  this  problem,  it  is  possible  by  means  of  a  proper 
arrangement  and  comparison  of  statistical  data  and  other 
known  facts  to  obtain  a  fairly  clear  idea  of  the  actual  situa- 
tion. 

Germany's  total  consumption  of  bread  grain  (after  deduc- 
tion for  seed)  amounted  during  the  harvest  year  1913-14  to 
10,322,000  tons  of  rye  and  6,455,000  tons  of  wheat.  The  fig- 
ures for  that  year  were  slightly  above  the  average;  in  round 
numbers,  the  bread  grain  consumption  amounts  to  10,000,000 
tons  of  rye  and  6,000,000  tons  of  wheat,  altogether  16,000,000 
tons.  Of  this  demand,  less  than  one-tenth  is  met  by  imports. 
In  so  favorable  a  year  as  1913  the  net  import  of  wheat  was 
2,000,000  tons,  while  of  rye  there  was  an  export  of  600,000 
tons.  There  was  a  considerable  net  export  of  flour,  both  of 
wheat  and  rye,  representing  500,000  tons  of  grain,  so  that  the 
actual  net  import  of  bread  grain  scarcely  amounted  to  1,000,000 
tons,  that  is  about  6  per  cent,  of  the  total  consumption.  Ger- 
many is,  on  the  whole,  self-supporting  in  the  field  of  bread 
grain  and  will  not  suffer  very  much  inconvenience  from  her 
exclusion  from  the  outer  world.  Under  normal  conditions, 
bread  grain  is  used  not  only  as  food  for  the  population  but  for 
several  other  purposes,  especially  for  fodder,  the  manufacture 
of  spirits  and  the  production  of  starch.  Calculating  on  the 
average  for  the  two  years  1912  and  1913,  it  can  be  estimated 

34 


SUPPLY   AND  DEMAND   OF   COMMODITIES  35 

that,  of  a  total  amount  of  17,842,000  tons,  no  less  than  3,162,000 
tons  were  employed  for  cattle  feeding,  the  manufacture  of 
spirits  and  industrial  purposes.  For  seed  1,466,000  tons  were 
used,  after  which  there  remained  13,214,000  tons  for  human 
food,  so  that  human  food  and  seed  took  altogether  14,680,000 
tons.  This  essential  need  of  bread  grains  can  be  met  by  a 
normal  harvest.  The  average  harvest  for  the  decade  1905- 
1914  amounted  to  about  15,000,000  tons,  the  maximum  being 
17,300,000  and  the  minimum  13,700,000  tons. 

The  consumption  of  bread  stuffs  in  the  forms  that  are  usual 
under  the  normal  conditions  of  modern  town  life  is  attended 
by  very  great  waste.  When  the  bakers  produce  fresh  bread 
several  times  a  day,  a  great  amount  of  stale  bread  is  thrown 
away,  or  employed  to  feed  the  pigs.  With  a  sensible  system  of 
economy  a  very  considerable  diminution  will  ensue  in  the  con- 
sumption of  bread  grain,  without  any  necessity  for  anybody 
to  eat  less  bread. 

Of  late  years,  Germany's  consumption  of  bread  grain  has 
been  abnormally  great,  as  compared  with  that  of  other  coun- 
tries. For  the  quinquennial  period  1902-1906,  it  is  calcu- 
lated at  500  pounds  per  head  of  the  population,  while  the 
corresponding  figure  for  England  is  only  365  pounds.  The 
consumption  of  bread  grain  in  Sweden  during  the  decade 
1901-1910  was,  on  an  average,  402  pounds  per  head.  That 
the  population  can  get  along  with  a  considerably  smaller 
amount  is  shown  by  the  fact  that  the  Swedish  consumption 
during  the  seventies  of  the  last  century,  was  310  pounds  and, 
during  the  sixties,  301  pounds  per  inhabitant.  During  the 
period  1901-05,  Italy  was  satisfied  with  330  pounds  per  head 
of  the  population.  If  Germany  adopts  this  Italian  standard, 
its  68,000,000  inhabitants  can  make  10,200,000  tons  of  bread 
grain  suffice  for  their  wants.  If  the  Germans  adopt  the 
Swedish  standard  for  the  first  decade  of  the  present  century, 
Germany  will  need  12,500,000  tons,  a  minimum  which  has  not 
been  reached  by  even  the  lowest  net  harvest  during  a  whole 
decade. 

To  obtain  a  sufficient  supply  of  bread  grain  is  by  no  means 
a  difficult  problem  for  Germany. 


36       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

The  harvest  of  1915  was  a  very  poor  one.  The  estimates 
made  cannot  be  considered  as  fully  reliable,  although  it  seems 
to  be  certain  that  the  harvest  was  considerably  below  the  aver- 
age—  probably  even  below  the  minimum  of  the  last  decade. 
The  oat  and  barley  harvests  were  also  bad,  and  since  the  lack 
of  foreign  fodder  stuffs  caused  inconvenience,  it  was  impos- 
sible to  prevent  the  employment  of  a  considerable  part  of  the 
bread  grain  as  fodder.  Under  such  circumstances  it  became 
necessary  to  adopt  the  strictest  economy  in  the  consumption 
of  bread  grain  as  human  food  by  means  of  a  system  which 
strictly  limited  the  daily  consumption  of  each  individual. 
Matters  were,  however,  not  so  bad  that  this  method  did  not 
meet  the  situation.  Nor  does  any  doubt  exist  in  Germany 
but  that  the  nation  will  be  able  to  tide  over  until  next  harvest ; 
it  is  even  estimated  that  there  will  be  a  surplus  sufficiently  large 
to  allow  for  a  possible  late  harvest. 

This  is  the  actual  condition  as  to  bread  grains  in  Germany. 
There  is  obviously  every  reason  to  believe  that  conditions  for 
next  year  will  be  better.  If  the  harvest  of  1916  be  but  normal, 
the  bread  grain  supply  will  be  quite  sufficient  for  the  follow- 
ing year;  even  should  the  harvest  be  somewhat  unfavorable, 
there  will  not  be  any  danger  of  any  real  scarcity  of  bread 
stuffs. 

Despite  the  figures  quoted  as  to  the  potato  production  in 
Germany,  during  the  past  winter  there  undeniably  existed  in 
many  places  an  actual  scarcity  of  this  vegetable.  The  chief 
explanation  is  to  be  found  in  the  considerable  increase  in  the 
use  of  potatoes  as  fodder  which  circumstances  rendered  neces- 
sary. But  other  things,  too,  added  to  the  difficulty.  In  the 
autumn  there  appears  to  have  existed  a  serious  disorganization 
of  the  potato  market,  which  prevented  the  distribution  of  the 
stores  that  must  be  carried  out  before  the  winter  begins.  The 
measures  taken  later  by  the  Government  and  by  the  admin- 
istration were  not  successful  in  bringing  order  out  of  the  chaos. 
In  Germany  it  is  the  custom  to  bury  the  potatoes  in  the  ground 
in  the  autumn,  and  cover  them  with  earth.  There  they  lie  in 
these  "  Mieten  "  ("  caches  ")  over  the  winter,  and  during  this 


SUPPLY   AND   DEMAND   OF   COMMODITIES  37 

period,  are  not  available  for  the  market.  All  these  circum- 
stances made  it  very  difficult  during  the  past  winter  to  keep 
the  population  supplied  with  potatoes,  but  these  difficulties 
were  overcome  with  the  arrival  of  spring.  An  improved  cen- 
tral organization  for  the  regulation  of  the  potato  market  was 
created,  the  supplies  became  accessible,  and  the  temperature 
permitted  of  transport  on  a  large  scale.  As  early  as  May  and 
June  the  new  potatoes  will  make  their  appearance  in  the  mar- 
ket, so  that  the  supplying  of  the  population  will  not  cause  any 
serious  anxiety;  for  next  year  many  improvements  in  the 
organization  of  distribution  may  be  expected.  The  technical 
progress  that  has  been  made  in  regard  to  the  utilization  of  the 
potato  as  an  article  of  nutriment  will  also  add  materially  to 
the  German  menu. 

As  to  meat  (inclusive  of  pork)  Germany  is  able  in  times 
of  peace  to  satisfy  95  per  cent,  of  her  needs  by  means  of  her 
own  production.  There  must,  of  course,  be  some  decrease  in 
the  production  of  cattle  now,  because  of  the  diminished  supply 
of  fodder;  this  may,  indeed,  lead  to  the  killing  off  of  some 
part  of  the  stock.  But  there  is  no  reason  to  suppose  that  the 
supply  of  meat  will  ever  be  less  than  during  the  past  winter. 
Improved  methods  of  using  the  meat  supply  should  also  tend 
to  make  the  meeting  of  food  demands  easy.  The  scarcity  of 
meat  of  late  should  be  ascribed  largely  to  the  want  of  organ- 
ization in  the  slaughtering  of  the  cattle  during  the  earlier 
period  of  the  war.  The  uncertainty  as  to  the  length  of  time 
the  fodder  could  last  led  to  an  excessive  killing  off  of  the 
stock  at  that  period.  The  increase  in  wages  has,  probably, 
temporarily  led  to  an  increased  consumption  of  meat ;  then  the 
enormous  demands  made  by  the  meat-preserving  factories  must 
be  taken  into  account,  demands  which  caused  a  most  uneco- 
nomical use  of  the  supplies.  A  central  regulation  of  the  meat 
market  has  now  been  effected,  and  as  all  the  experience  gained 
has  led  to  a  clearer  insight  into  the  conditions  necessary  for 
the  success  of  such  regulation,  it  is  reasonable  to  assume  that 
in  the  future  it  will  be  possible  to  supply  the  necessary  public 
demand  for  meat  without  any  difficulty. 


38       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

It  should  be  clearly  understood  that  during  the  period  im- 
mediately preceding  the  war,  the  consumption  of  meat  in  Ger- 
many had  risen  to  a  really  abnormal  height.  It  is  stated  that 
the  annual  average  individual  consumption  amounted  to  119 
pounds.  This  figure  is  larger  than  that  for  England  even, 
which  has  previously  been  considered  the  highest  in  Europe 
and  which,  for  the  quinquennial  period  1900-04,  is  given  at 
115  pounds  per  head.  Such  a  consumption  of  meat  is  un- 
necessarily great,  and  affords  a  very  wide  margin  for  restric- 
tions. This  is  better  seen  by  glancing  at  the  figures  showing 
the  growth  of  the  consumption  of  meat  in  Germany  during 
the  last  generation.  Even  as  late  as  1880,  the  annual  con- 
sumption per  head  was,  according  to  Professor  Esslen's  cal- 
culations, about  66  pounds.  Ten  years  later  this  figure  had 
reached  88  pounds,  and  then  rose  with  great  rapidity  to  119 
pounds.  According  to  this  estimate,  therefore,  the  increase  in 
the  consumption  of  meat  has  risen  by  no  less  than  80  per  cent. 
A  very  considerable  restriction  in  the  consumption  would  be 
necessary  before  it  fell  to  the  88  pounds  average,  and  even 
then  it  would  be  merely  a  return  to  the  standard  that  the  Ger- 
man nation,  at  the  beginning  of  the  nineties,  considered  a  note- 
worthy improvement  as  compared  with  the  figures  of  the  pre- 
ceding decade.  It  seems  hardly  possible  that  the  war  will 
force  a  return  to  the  standard  of  1880,  the  66  pounds  average, 
but  it  may  be  useful  to  bear  in  mind  that,  even  with  that  limit, 
the  German  nation  was  able  to  satisfy  its  needs  and  to  per- 
form work  of  a  high  standard.  According  to  another  report 
which  has  been  placed  at  my  disposal,  the  consumption  of  meat 
per  head  in  1870  was  70  pounds,  rising  to  117  pounds  just 
before  the  outbreak  of  the  present  war.  Of  course,  the  esti- 
mates for  earlier  dates  are  attended  with  uncertainty,  but  the 
figures  quoted  seem  to  prove  that  the  present  consumption  of 
meat  leaves  a  very  wide  margin  for  restriction.  Naturally, 
the  high  price  of  meat  has  already  compelled  the  vast  mass  of, 
the  population  to  reduce  very  much  its  use  of  meat,  so  that 
the  compulsory  regulation  of  the  consumption  would,  for  these 
classes  of  society,  mean  almost  no  further  restriction. 


SUPPLY  AND  DEMAND   OF   COMMODITIES  39 

The  consumption  of  fats  in  Germany,  especially  in  the  north 
of  the  country,  has  been  extraordinarily  great,  and  offers 
ample  opportunity  for  reduction.  In  my  opinion,  and  I  think 
that  of  most  foreigners,  the  use  of  fats  in  German  cookery  is 
carried  to  excess,  and  I  find  the  dishes  offered  at  the  restaurants 
on  the  so-called  "  fat- free  days  "  in  some  respects  far  more 
palatable  than  the  ordinary  ones.  Still,  this  does  not  prevent 
the  problem  of  supplying  the  population  with  the  necessary 
amount  of  fat  from  being  a  very  serious  one  indeed. 

As  far  as  I  can  see,  the  gravest  part  of  the  food  question 
is  the  great  reduction  in  the  production  of  milk.  The  want  of 
milk  must  in  the  first  place  affect  the  children,  who  will  suffer 
from  the  extraordinary  scarcity  of  lacteous  fat  substance. 
However,  the  local  authorities  and  other  bodies  do  a  great  deal 
in  order  that  the  children  belonging  to  the  poorer  classes,  espe- 
cially those  under  two  years  of  age,  shall  not  be  without  milk. 

I  also  believe  that  the  problem  of  nourishing  the  growing 
generation  has  been  so  far  solved  that  the  children  do  not 
suffer  directly  from  hunger.  I  endeavored  to  get  first  hand 
knowledge  in  regard  to  this  for  myself  by  visiting  a  primary 
school  in  one  of  the  workingmen's  quarters  in  Berlin;  I  abso^- 
lutely  did  not  receive  the  impression  that  the  children  were 
suffering  from  the  want  of  proper  nourishment.  The  very 
poorest  received  their  food  through  the  school.  Very  few, 
however,  seemed  to  avail  themselves  of  this  opportunity;  in 
one  large  class  of,  I  think,  fifty  girls,  only  two  were  getting 
their  meals  from  the  school.  None  of  the  teachers  thought 
that  the  children  had  lost  strength  because  of  insufficient  nour- 
ishment. The  school-attendance  was  normal  and  so  was  the 
attention  paid  to  the  instruction. 

If  there  really  were  an  extreme  scarcity  of  nourishing  food, 
the  fact  would  become  apparent  in  a  diminished  power  of  re- 
sistance against  disease,  and  this  would  be  the  case  more 
especially  as  regards  the  children.  I  have  spoken  to  the  lead- 
ing physicians  of  Berlin  on  the  matter,  and  have  studied  the 
diagrams  of  children's  diseases  and  infant  mortality  kept  in 
the  municipal  statistical  bureau.  During  the  winter  there  have 


40       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

been  more  cases  than  usual  of  diphtheria  and  scarlet  fever, 
but  it  was  thought  that  the  higher  figures  were  due  to  the 
greater  exactness  with  which  all  cases  were  listed  during  the 
war ;  owing  to  the  employment  of  municipal  sick-nurses,  cases 
of  illness  were  more  generally  reported  than  before.  The 
curves  showed  no  increase  of  infant  mortality,  however,  so 
that  it  is  clear  that  the  children's  powers  of  resistance  to  dis- 
ease has  not  been  less  than  under  ordinary  conditions.  On  the 
whole,  the  state  of  health  in  Berlin  was  satisfactory. 

The  same  may  be  said  about  the  country  as  a  whole.  Ger- 
many is  to-day  inevitably  more  exposed  to  the  spread  of  con- 
tagious or  infectious  diseases,  especially  from  the  east  front, 
where  typhus  fever  and  cholera  have  constantly  to  be  guarded 
against.  In  Germany,  hundreds  of  cases  of  cholera  have  oc- 
curred at  various  places  since  the  beginning  of  the  war,  but  it 
has  been  found  quite  possible  to  isolate  these  attacks.  The 
efforts  made  to  prevent  individual  cases  of  typhus  from  devel- 
oping into  epidemics  have  been  equally  successful.  This  is  a 
really  magnificent  result  for  modern  scientific  hygiene;  and 
even  if  there  is  no  direct  connection  between  this  fact  and  the 
nourishment  of  the  population,  the  impression  is  inescapable 
that  it  would  hardly  have  been  possible  to  obtain  the  same 
results  had  the  population  lost  its  physical  powers  of  resist- 
ance to  any  great  degree  owing  to  insufficient  nourishment. 

A  decisive  proof  that  such  is  not  the  case  is  the  general  in- 
crease of  the  working  capacity  of  the  population  that  has  evi- 
dently taken  place  during  the  war.  From  the  performances 
of  the  German  army  it  is  obvious  that,  as  far  as  the  military 
forces  are  concerned,  there  exists  no  general  state  of  insuffi- 
cient nourishment.  In  the  ranks  of  the  civil  population  it 
may  be  said  to  be  the  rule  that  more  work  is  done  than  in 
normal  times.  In  the  schools  the  teachers  have  to  do  perhaps 
as  much  as  50  per  cent,  more  work  than  usual.  In  the  Gov- 
ernment and  business  offices,  the  work  of  those  absent  has  to 
be  performed  by  increased  labor  on  the  part  of  the  remainder 
of  the  staff.  In  the  industrial  world,  too,  there  prevails  an 
abnormally  long  working  day,  with  an  extensive  use  of  over- 


SUPPLY   AND  DEMAND   OF   COMMODITIES  4! 

time  and  Sunday  and  night-work.  This  would  be  altogether 
impossible  if  the  population  was  insufficiently  nourished,  for 
such  a  condition  of  things  would  soon  become  apparent  in  a 
diminished  power  of  work. 

One  does  not  receive  the  least  impression  of  insufficient 
nourishment  if  one  observes  the  people  one  meets  in  the  street. 
And  if  people  who  may  be  considered  as  authorities  be  ques- 
tioned, one  hears  that  in  many  places  there  are  difficulties,  but 
no  kind  of  famine  exists  or  is  to  be  feared.  It  is  the  prevail- 
ing opinion,  too,  that  the  agricultural  population  is  better  fed 
than  the  townspeople. 

I  believe,  however,  that  one  must  be  exceedingly  careful 
when  endeavoring  to  form  an  objective  opinion  of  the  prob- 
lem of  the  nourishment  of  the  German  nation.  Even  if,  on 
the  whole,  there  exists  no  such  acute  insufficiency  of  nourish- 
ment as  to  be  accompanied  by  an  immediate  diminution  of  the 
physical  powers,  it  must  be  supposed  that  the  regime  is  un- 
satisfactory, especially  for  the  youth  of  the  country,  in  so  far 
as  in  the  long  run  a  certain  amount  of  injury  to  the  general 
health  will  result.  Physicians  from  neutral  countries  are  said 
to  have  expressed  the  opinion  that  the  diet  now  observed  by 
German  schoolchildren  is  unsatisfactory,  and  that  the  youth 
of  the  country  who,  just  at  a  growing  age,  are  compelled  to 
submit  to  such  restrictions  in  point  of  food  will  suffer  from 
it  in  future  years  in  the  form  of  diminished  vital  energy  and 
working  power.  It  cannot  be  denied  that  such  an  opinion  is 
plausible.  Should  the  war  continue  for  a  long  time,  and  the 
restricted  diet  for  children  be  enforced  for  that  period,  it  is 
to  be  feared  that  these  restrictions  would  leave  lasting  traces 
behind  them,  thereby  increasing  the  curse  that  the  war  will 
bestow  as  an  inheritance  in  so  many  other  respects.  But  it  is 
certain  that  at  present  this  danger  is  not  considered  as  actual. 
The  nation  is  prepared  to  do  everything  possible  to  help  the 
growing  generation  to  escape  the  sufferings  caused  by  the  pol- 
icy of  a  "  war  of  starvation,"  but  it  is  also  prepared  to  endure 
all  the  privations  and  injurious  results  which  cannot  be  avoided. 
In  comparison  with  the  hecatombs  of  human  lives  which  are 


42       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

every  day  sacrificed  at  the  front,  the  evil  results  which  may 
possibly  manifest  themselves  in  future  years  are  of  altogether 
too  small  importance  to  be  taken  into  consideration. 

As  to  the  ability  of  Germany  to  hold  out  so  far  as  the  pro- 
visioning of  the  country  is  concerned,  attention  must,  first  and 
foremost,  be  paid  to  the  fact  that  the  country  has  now  carried 
on  the  struggle  for  more  than  a  year  and  a  half  and  that,  dur- 
ing that  period,  it  has  not  by  any  means  been  in  a  more  favor- 
able position  than  it  may  be  expected  to  enjoy  in  the  future. 
It  is  true  that  one  fact  or  another  may  have  tended  to  lower 
the  produce  of  agriculture.  It  is  conceivable  that  the  number 
of  horses  employed  in  agricultural  work  may  be  still  further 
diminished,  or  there  may  arise  a  growing  scarcity  of  phosphoric 
acid  for  fertilizing  purposes.  But  other  very  weighty  factors 
act  in  the  opposite  direction:  the  occupation  of  extensive  and 
fertile  enemy  provinces  which,  in  the  degree  that  they  can  be 
cultivated  and  utilized  must  contribute  to  the  provisioning  of 
Germany;  then  there  is  in  prospect  an  increased  production 
of  nitrogenous  manures.  In  addition,  the  harvest  of  1915  was 
considerably  below  the  average,  almost  a  failure  of  the  crops; 
but  notwithstanding  this,  Germany  was  able  to  tide  over  her 
difficulties  during  the  succeeding  winter.  From  an  objective 
point  of  view,  there  are  reasons  why  the  coming  harvest- 
year  may  be  expected  to  be  better  than  the  last. 

There  is  another  reason  why  the  German  food  problem  must 
be  considered  as  more  favorable  for  the  coming  year  than  it 
has  been  hitherto.  I  mean  by  this  the  organization  of  the 
entire  system  of  food  supply.  Much  has  been  said  about  the 
organizing  skill  of  the  Germans,  and  they  are  fully  entitled  to 
the  general  admiration  they  have  aroused  for  this  ability. 
But  it  must  not  be  forgotten  that  Germany  entered  the  con- 
flict perfectly  unprepared  as  far  as  regards  the  arrangements 
necessary  for  supplying  the  population  with  food,  so  that  there 
prevailed  at  first  a  serious  amount  of  disorder,  and  the  earlier 
measures  adopted  by  the  Government  came  partly  too  late  and 
partly  proved  mistaken.  It  is  impossible  to  study  the  food 
supply  policy  of  Germany  during  the  past  eighteen  months 


SUPPLY   AND  DEMAND   OF   COMMODITIES  43 

without  receiving  the  impression  that,  at  the  beginning,  the* 
Government  first  felt  its  way  awkwardly,  until  it  finally  dis- 
covered the  comparatively  stable  and  clear-sighted  plan  it  is 
now  following.  The  proof  of  this  is  found  in  the  sharp  re- 
versals of  method  that  have  occurred  in  several  departments, 
for  example,  in  regard  to  the  idea  entertained  of  the  importance 
of  sugar  production,  and  in  the  remarkable  flood  of  rules  and 
alterations  of  which  the  regulation  of  the  potato  market  is  a 
much  debated  instance. 

At  the  beginning,  Germany  had  no  sufficient  ground  on  which 
to  base  her  methods,  the  amount  of  the  existing  resources  be- 
ing unknown.  Certain  measures  of  a  very  dubious  character, 
such  as  the  great  slaughter  of  pigs  in  the  spring  of  1915,  can 
be  referred  directly  to  such  causes ;  from  the  beginning  it  seems 
evident  that  the  authorities  did  not  fully  grasp  the  nature  of 
the  problem  before  them,  and,  therefore,  did  not  quite  know 
how  to  choose  the  right  means  of  solving  the  difficulties.  The 
policy  of  maximum  prices,  which  at  the  beginning  played  such 
a  great  role,  should  be  regarded  merely  as  a  concession  to  pop- 
ular sentiment  in  connection  with  the  constant  increase  in  the 
price  of  food. 

It  may  be  useful  to  devote  here  a  moment  to  an  analysis  of 
what  is  really  involved  by  this  problem.  Under  normal  condi- 
tions, prices  have  the  social-economic  function  of  restricting 
the  demand  for  any  kind  of  serviceable  articles,  so  as  to  bring 
the  demand  in  harmony  with  the  available  resources.  Under 
the  abnormal  conditions  caused  by  the  war,  prices  cannot  per- 
form this  task  without  rising  to  unreasonable  heights.  The 
popular  remedy  is  the  fixing  of  prices  by  law.  But  people 
forget  that  this  will  not  give  any  solution  to  the  chief  prob- 
lem^—  the  necessary  limitation  of  the  demand.  This  problem 
must  be  solved,  and  it  is  not  before  it  is  seen  that  this  task  is 
the  vital  one  that  people  begin  to  find  the  right  means  of 
solving  the  food  supply  problem.  This  means  is  the  direct 
limitation  of  individual  consumption  by  regulations  which,  of 
whatever  nature  they  may  be,  have  this  in  common,  that  in 
cooperation  with  the  prices,  charged,  they  bring  about  the  neces- 


44       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

sary  restriction  of  the  demand.  Such  regulations  are  those 
fixing  days  when  no  meat  or  no  fat  can  be  eaten;  those  that 
order  the  early  closing  of  restaurants,  or  limit  the  amount  of 
any  goods  that  the  individual  may  purchase  at  one  time,  etc. 
The  rise  in  prices  acts  together  with  these  measures  as  a  co- 
operative factor  which,  in  restricting  the  demand,  attains  its 
highest  development  in  the  ticket-system,  which  regulates  each 
individual's  consumption  of  any  article  —  of  bread,  for  ex- 
ample. When  the  rise  in  prices  is  assisted  by  such  a  powerful 
ally  as  the  ticket-system,  prices  need  not  be  driven  up  to  an 
excessive  height  before  the  object  of  the  measure  is  attained. 

In  my  opinion  —  and  it  is  one  I  have  long  entertained  —  the 
science  of  political  economy  has  long  suffered  from  the  fault 
that  it  has  not  sufficiently  emphasized  the  economic  task  apper- 
taining to  prices,  and  that  it  has 'not,  as  it  should,  placed  this 
task  in  the  foreground  as  the  great  problem  of  social  economy. 
The  experiences  gained  during  the  present  war  have  proved 
the  practical  damage  caused  by  this  shortcoming  of  economic 
theory. 

That  the  problem  of  the  regulation  of  the  food  supply  was 
not,  from  the  beginning,  always  properly  understood;  that 
therefore,  and  in  consequence  of  a  want  of  knowledge  of  the 
real  state  of  affairs,  mistakes  were  made ;  that  the  development 
of  new  systems  and  the  creation  of  fresh  organizations  thereby 
rendered  necessary  has  taken  time,  and  that,  in  consequence 
of  all  these  circumstances,  the  food  problem  as  a  whole  has 
hitherto  been  somewhat  ineffectively  solved,  is  indubitable. 
This  statement  does  not  spring  from  any  desire  to  criticise. 
Indeed,  all  opinions  concerning  persons  or  their  actions  fall 
quite  without  the  scope  of  the  present  research.  But  the  short- 
comings in  the  food  supply  policy  of  the  past  must  be  pointed 
out  here,  because  they  undoubtedly  diminished  the  effective- 
ness of  the  system  employed  for  providing  the  population  with 
food  to  a  point  considerably  below  the  standard  that  has  now 
been  reached,  a  standard  which  will  be  determinative  of  the 
power  of  Germany  —  as  far  as  the  question  of  the  food  supply 
is  concerned  —  to  hold  out  throughout  the  struggle,  no  matter 


SUPPLY   AND  DEMAND   OF   COMMODITIES  45 

its  length.  Since  it  has  been  proved  possible  to  solve  the 
problem  of  the  national  food  supply  of  Germany  by  means 
of  the  more  or  less  defective  arrangements  hitherto  employed, 
the  conclusion  is  inevitable  that  in  the  future  this  problem, 
so  far  as  it  depends  on  organization  and  rational  direction,  will 
be  met  in  an  even  more  satisfactory  way.  And  it  seems  to 
me  that  this  is  a  specially  important  factor  in  regard  to  the 
question  that  I  am  now  endeavoring  to  answer. 

That  the  food  supply  policy  will,  in  the  future,  be  managed 
better  than  hitherto,  may  be  considered  as  probable,  because 
a  rich  fund  of  experience  has  now  been  gathered  which  was 
entirely  wanting  at  the  beginning  of  the  war.  In  addition, 
there  is  a  circumstance  that  time  has  been  found  to  create  the 
great  central  organizations  for  the  regulation  of  the  distribu- 
tion and  consumption  of  the  necessaries  of  life.  At  present, 
this  regulation  extends  not  only  to  bread  but  also  to  such 
articles  as  potatoes  and  meat. 

It  is  true  that  the  want  of  food  is  not  the  only  need  that 
requires  to  be  satisfied,  but  it  is  the  most  pressing  one;  it  is 
a  need  that  must  be  satisfied  every  day.  Other  needs  can  be 
served  by  more  or  less  durable  articles,  such  as  clothes,  furni- 
ture and  dwellings.  As  regards  these,  one  can  continue  to 
employ  what  is  already  in  use,  for  the  necessity  of  procuring 
such  articles  afresh  is  not  nearly  so  pressing,  even  if  in  the 
long  run  it  will  claim  attention.* 

As  I  have  already  stated,  the  traveler  cannot  observe  any 
sign  of  a  scarcity  of  clothes  or  of  shoes  in  Germany.  As  far 
as  I  can  see,  there  is  no  reason  to  expect  that  the  scarcity  of 
such  articles  will  become  so  extreme  in  the  nearest  future  that 
it  will  really  be  felt  as  a  serious  difficulty  —  one  to  be  included 
in  the  number  of  the  other  great  problems  and  hard  sacrifices 
of  the  war.  Still  less,  of  course,  can  such  a  scarcity  occur  as 
regards  furniture  and  dwellings.  What  is  at  present  in  use 
can  be  employed  for  a  long  time  forward. 

*  This  was  written  before  the  entire  question  of  food  supplies  through- 
out Germany  was  placed  into  the  hands  of  one  single  official  whose 
powers  approach  those  of  a  Dictator. 


46       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

The  general  impression  one  receives  of  the  condition  of  the 
great  consuming  public  is  unconditionally  satisfactory.  Peo- 
ple in  general  do  not  seem  to  be  suffering  from  economic  diffi- 
culties. The  theaters  and  concerts  are  well  attended,  and  at 
the  great  popular  restaurants  it  is  very  difficult  in  the  evening 
to  get  a  table.  The  large  wine  restaurants  have  also  plenty 
of  patrons.  But  the  most  remarkable  fact  is  that  one  sees 
no  poor  people  at  all.  I  have  gone  about  in  different  towns, 
both  in  the  forenoons  and  evenings,  in  well-to-do  and  in  poorer 
quarters;  I  have  seen  the  working  population  making  their 
small  purchases  in  the  markets  towards  evening ;  I  have  passed 
through  narrow,  badly  lighted  streets;  I  have  stopped  and 
asked  my  way,  but  the  whole  time  I  was  in  Germany  no  one 
ever  asked  me  for  alms.  Neither  did  I  see  any  beggars.  The 
only  one  I  observed  who  could  perhaps  be  classed  as  such  was 
an  old  man  without  legs  who,  late  at  night,  said  "  good-eve- 
ning "  to  someone  he  met  and  probably  intended  to  get  alms. 
I  mention  this  merely  in  the  interest  of  truth,  for  it  was  lit- 
erally the  only  case  of  begging  I  was  able  to  observe.  We 
would  be  glad  in  Sweden  if,  in  the  most  flourishing  times,  we 
were  able  to  say  that  we  had  reached  such  a  high  standard  of 
social  care  for  the  poor.  But  we  are  still  far  from  that.  That 
it  can  be  maintained  in  a  great  industrial  country  like  Ger- 
many, which  suddenly  finds  itself  cut  off  from  the  outer  world 
and  is  engaged  in  such  a  gigantic  struggle  as  the  present  war, 
is  a  most  extraordinary  proof  of  internal  strength.  For  if 
Germany  really  were  on  the  point  of  economical  breakdown, 
and  if  the  population  really  suffered  to  a  great  extent  from 
hunger,  it  would,  of  course,  be  impossible  for  such  need  not 
to  find  visible  expression  in  the  daily  life.  Those  perfectly  de- 
based and  disreputable  individuals  that  one  sees  at  every  other 
street  corner  in  London  in  the  most  peaceful  times  and  amid 
periods  of  the  greatest  economic  prosperity,  are  nowhere  vis- 
ible in  Germany  even  to-day.  Want  and  despair,  as  we  know, 
find  expression  in  excessive  drinking.  The  only  sign  I  could 
observe  was  in  the  case  of  an  artisan  who  might  be  possibly 
described  as  being  somewhat  "  jolly." 


STATUS  OF  GERMAN  CURRENCY 

IN  order  to  judge  correctly  the  economic  strength  of  Ger- 
many it  is  of  prime  importance  to  have  a  perfectly  clear 
understanding  of  the  effect  the  war  has  had  and  is  prob- 
ably  going   to   continue   to  have   on   the  value   of   German 
currency  during  its  duration  and  even  after  peace  has  been 
restored. 

In  Germany  the  prevailing  opinion  is,  on  the  whole,  opti- 
mistic. It  is  not  admitted  that  the  domestic  value  of  the  mark 
has  fallen  or,  at  least,  there  is  a  universal  endeavor  to  mitigate 
this  decline  to  the  utmost.  The  fall  in  the  value  of  the  mark, 
undeniably  apparent  in  the  foreign  exchanges,  financial  experts 
generally  try  to  explain  as  a  result  of  the  fact  that  the  balance 
of  payment  due  foreign  countries  is  for  the  moment  unfavor- 
able :  Since  Germany  cannot  freely  dispose  over  the  amounts 
due  her  from  foreign  countries,  or  even  over  the  interest 
on  such  sums,  and  since  it  is  difficult  for  Germany  to  export 
goods,  difficulties  are  bound  to  arise  in  the  way  of  making 
payments  abroad,  and  these  difficulties  find  expression  in  a 
rise  of  the  foreign  exchanges,  or  conversely,  in  a  fall  of  the 
value  of  German  money  as  measured  by  other  standards.  But 
this  diminution  in  the  value  of  the  mark  is  —  according  to  the 
German  view  of  the  matter  —  only  temporary.  As  soon  as 
the  war  comes  to  an  end  and  Germany  has  once  more  at  her 
command  the  monies  due  her,  together  with  the  interest  that 
will  have  accumulated  during  the  war  and  German  export 
trade  is  resumed,  it  is  believed  that  the  situation  will  at  once 
change  in  favor  of  Germany  and  the  mark  value  resume  its 
normal  position  in  relation  to  other  leading  world-values,  such 
as  the  pound  sterling  and  the  dollar.  Of  course  it  is  impos- 
sible to  ignore  the  fact  that  the  amount  of  notes  in  circulation 
and  of  other  means  of  payment  has  increased  considerably 

47 


48       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

during  the  war,  but  the  idea  prevails  that  this  increase  in  the 
circulation  cannot  at  all,  or  only  to  a  slight  degree,  be  consid- 
ered as  actual  inflation.  It  is  pointed  out  that  war  conditions 
have  caused  many  gaps  in  the  circulation  which  must  be  filled 
up  by  an  increased  issue  of  means  of  payment.  In  the  first 
place  there  is  the  amount  of  gold  paid  into  the  Reichsbank 
that  is  thought  of,  besides  that  it  is  also  argued  that  drafts 
have  lost  their  old  importance  as  means  of  payment  and  that, 
especially  because  of  the  occupation  of  foreign  territories,  the 
area  in  which  the  mark  has  to  serve  as  a  means  of  payment 
has  increased  very  considerably. 

In  my  opinion,  the  seriously  weak  point  in  these  explana- 
tions is  that  they  do  not  seem  to  recognize  the  need  to  meet 
that  increase  in  the  demand  for  circulating  mediums  of  pay- 
ment which  must  accompany  the  general  rise  in  prices  and 
which  alone  must  almost  correspond  to  the  entire  increase  in 
circulation  that  has  actually  taken  place.  The  other  reasons 
brought  forward  to  support  the  opinion  that  the  amount  of 
means  of  payment  in  circulation  really  needed  to  be  increased 
can  hardly  be  admitted.  It  may,  of  course,  be  true  that  a 
certain  amount  of  drafts  have  disappeared  from  circulation, 
but  payment  by  means  of  drafts  has  evidently  been  mainly 
replaced  by  payments  by  means  of  checks,  and  the  whole  of 
this  change  cannot  have  had  any  great  influence  on  the  demand 
for  circulating  mediums.  Neither  can  the  occupation  of  for- 
eign territory  be  considered  a  very  tenable  reason  for  an  in- 
crease in  the  demand  for  circulation  mediums.  Both  in  Bel- 
gium and  in  the  north  of  France  there  are  in  circulation,  great 
amounts  of  franc-notes  which  have  been  specially  emitted 
under  the  control  of  the  German  administration.  It  is  true 
that,  in  addition  to  these  notes,  the  mark  is  also  in  circulation, 
and  German  notes  lie  as  security  in  Belgian  banks  —  in  the 
previous  note-issuing  bank  (Banque  Nationale)  to  an  amount 
of  242,000,000  francs  and  in  the  new  one  (Societe  Generate) 
164,000,000  francs,  a  total  sum  of  406,000,000  francs,  or 
325,000,000  marks  (December  31,  1915).  In  Poland  and  the 
other  occupied  Russian  provinces,  the  ruble  is  still  the  means 


STATUS   OF   GERMAN    CURRENCY  49 

of  payment  and  the  mark  forms  only  a  supplementary  means 
of  circulation.  According  to  the  best  opinions  at  my  disposal, 
the  total  amount  of  German  marks  absorbed  by  the  occupied 
territories  should  amount  to  about  1,500,000,000  marks.  As, 
however,  the  total  amount  of  marks  in  circulation  is,  in  round 
numbers,  10,000,000,000  about  one-seventh  or  at  most  one- 
sixth  of  the  circulation  is  within  the  occupied  countries.  But 
this  is  certainly  not  more  than  corresponds  to  that  portion  of 
the  German  nation  belonging  to  the  army  within  the  territory 
in  question,  if  due  consideration  be  paid,  as  it  should  be,  to 
the  fact  that  the  army  consists  only  of  adult  men  in  the  prime 
of  life.  If  these  men  were  at  home,  then  I  consider  there 
would  fall  to  their  share  an  equally  large  part  of  the  total 
mark-circulation  as  is  now  used  in  the  occupied  territories, 
and  therefore  the  occupation  cannot  in  itself  be  considered 
as  any  reason  for  an  increase  in  the  demand  for  circulating 
mediums. 

According  to  the  opinion  which  I  shall  try  to  expound  and 
prove  in  the  following  pages,  the  relative  increase  in  the 
amount  of  circulating  mediums  that  has  occurred  in  Germany 
during  the  war  must  be  regarded,  in  the  main,  as  an  actual 
inflation  which  to  a  corresponding  degree  has  diminished  the 
value  of  the  mark.  If  I  am  unable  to  adopt  the  opinion  pre- 
vailing in  Germany  with  regard  to  the  currency  question,  I 
must  at  the  same  time  declare  that  the  theory  in  regard  to 
German  finances  exposed  by  the  press  of  Germany's  foes  is 
quite  untenable. 

In  its  simplest,  popular  form  this  theory  is  as  follows :  The 
pound  sterling  is  quoted  in  New  York  at  two  per  cent,  dis- 
count and  the  mark  at  twenty  per  cent,  discount ;  consequently, 
it  is  said,  the  position  of  the  mark  is  ten  times  worse  than  that 
of  the  pound.  In  other  words,  the  relative  appraisement  of 
the  money  standards  of  the  warring  countries  on  any  neutral 
market  such  as  New  York,  is  taken  as  an  expression  of  the 
relative  degree  of  depreciation  of  these  standards.  People 
even  assert  that  these  exchange  quotations  are  an  expression 
of  the  opinion  entertained  by  the  neutral  world  of  the  credit 


50       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

the  various  belligerent  nations  deserve  and,  consequently,  of 
the  confidence  felt  by  the  neutral  world  on  the  economic  power 
and  future  prospects  of  the  various  parties.  That  this  latter 
interpretation  is  arbitrary  and  untenable  is  perfectly  under- 
stood by  every  one  who  knows  anything  of  international  ex- 
change business  during  wartimes.  Such  business  is  conducted 
from  day  to  day  and  from  hour  to  hour,  and  is  hardly  con- 
cerned with  any  kind  of  speculation  as  to  what  will  happen  in 
the  long  run  to  one  party  or  another.  This  is  fairly  self- 
evident,  but  I  intend  to  go  a  step  farther  and  prove  that,  on 
the  whole,  any  idea  of  the  relative  depreciation  of  the  money 
of  the  belligerent  nations  which  is  formed  by  studying  the 
figures  at  which  their  exchanges  are  quoted  on  the  neutral 
market,  is  altogether  misleading. 

The  explanation  of  this  lies  in  the  simple  fact  that  the  cur- 
rency of  neutral  countries,  too,  has  suffered  considerable  de- 
preciation during  the  war.  None  of  these  currencies  form  a 
fixed  point,  starting  from  which  one  is  able  to  judge  of  the 
relative  extent  of  the  depreciation  of  the  other  currencies.  I 
can  sit  here  in  Stockholm  and,  day  by  day,  observe  how  much 
the  rates  of  exchange  of  the  belligerent  nations  grow  worse 
or  better.  But  this  will  give  me  no  idea  as  to  the  real  move- 
ments of  the  values  of  the  different  currencies,  before  I  have 
learned  to  what  extent  the  Swedish  money  has  fallen  in  value 
during  the  war. 

The  rates  of  exchange  in  one  place  —  for  example  in  Stock- 
holm —  reflect  the  relative  movements  of  the  different  cur- 
rencies. If,  at  the  same  time,  we  could  learn  the  actual 
depreciation  of  any  one  of  these  currencies,  it  does  not  matter 
which,  we  should  have  a  picture  of  the  absolute  depreciations 
of  all  the  currencies.  As  to  England  this  step  is  possible  be- 
cause of  the  series  of  index-numbers  of  general  price  levels 
published  in  that  country.  I  have  followed  the  Sauerbeck 
series  which,  at  present,  is  continued  by  the  Statist.  Before 
the  war  this  index  stood,  let  us  say,  at  82.  Since  then,  the 
general  level  of  prices  coinciding  with  the  inflation  which  has 
taken  place  there,  has  risen  considerably  and  for  March,  1916, 


STATUS   OF   GERMAN    CURRENCY  5 1 

the  index  figure  is  130.4.  This  indicates  a  relative  rise  in  the 
proportion  of-  100-159,  that  is,  English  currency  shows  an  in- 
flation of  159. 

After  having  determined  the  absolute  movement  of  English 
currency,  it  will  be  possible,  with  the  assistance  of  the  rates 
of  the  exchange  in  Stockholm,  to  determine  the  relative  move- 
ments of  other  currencies  in  comparison  with  that  of  England, 
and  thereby  get  a  picture  of  the  absolute  depreciation  of  all 
currencies  during  the  war.  If  we  start  from  the  average  rates 
of  exchange  in  Stockholm  during  March,  1916,  we  find  in  this 
way  the  following  inflations :  * 

Sweden   146.2 

England 159.0 

France    177-8 

Germany 207.7 

Russia   251.1 

All  currencies  have  considerably  deteriorated,  including  the 
Swedish,  which,  however,  is  at  present  in  a  better  position  than 
most  other  currencies  in  the  world.  When  we  study  these  ab- 
solute depreciations,  we  find  that  they  are  everywhere  of  the 
same  character  and  that,  although  there  certainly  exists  a  dif- 
ference in  degree,  it  is  by  no  means  so  great  as  one  might  be 
led  to  believe  by  a  superficial  glance  at  the  relative  deprecia- 
tions of  belligerent  in  proportion  to  any  neutral  currency. 

I  have  closely  followed  this  development  since  the  beginning 
of  the  war,  and  have  compared  the  results  in  the  following 
diagram  which  shows,  month  by  month,  the  continuous  abso- 
lute inflation  of  money  in  the  belligerent  countries  since  July, 
1914. 

This  inflation,  in  each  country,  is  intimately  allied  with  the 
increase  in  the  total  amount  of  the  circulating  medium. 
Though  it  is  true,  that  a  reliable  calculation  of  this  increase  is 
attended  by  great  difficulties,  an  approximate  idea  of  it  may 
be  obtained  by  means  of  the  figures  available. 

The  estimate  is,  perhaps,  most  difficult  in  the  case  of  Eng- 
land, since  we  do  not  know  with  exactness  how  much  gold 

*  For  April  figures,  see  note  at  the  end  of  the  chapter. 


52  GERMANY  S   ECONOMIC    POWER   OF  RESISTANCE 

has  left  the  country  since  the  beginning  of  the  war ;  it  is  even 
uncertain  how  much  gold  was  in  circulation  there  before  the 
war.  However,  we  shall  not  be  far  wrong  if  we  estimate  the 
total  circulation  in  England  before  the  war  at  about  $1,000,- 


80 
70 
60 
250 
40 
30 
20 
10 
200 
90 
80 
70 
60 
150 
40 
30 
20 
10 
100 
19 

/ 

\ 

R 

/ 

/ 

1 

1 

1 

/ 

/ 

"G 

/ 

/ 

/ 

/ 

/ 

i 

/ 

/ 

/ 

/ 

F 

/ 

1 

i 

/ 

/ 

/ 

,s. 

/ 

jf 

"'i 

^, 

y 

/ 

-•"' 

^, 

- 

s 

/ 

/ 

-- 

— 

"s" 

/ 

/ 

/ 

-» 





.-• 

s 

-<^ 

S* 

,*>' 

/ 

/ 

^ 

•'f/ 

,-/-• 

^ 

___^_ 

^ 

x 

/<• 

r 

I 

£** 

"**= 

-•"' 

'89   10  11  12    1     2     34     56     78    9  10  11  12    1    234     56     7    89101 
14                         1915                                                     1916 

Currency  inflation  during  the  war.     S  =  Sweden,  E  =  England, 
F  =  France,  G  =  Germany  and  R  =  Russia. 

000,000,  and  during  the  first  months  of  1916,  at  about 
$1,500,000,000.  The  increase  corresponds  to  the  issue  of  the 
so-called  currency  notes.  This  increase  amounts  in  round 
numbers  to  50  per  cent.,  which  nearly  corresponds  to  the 
simultaneous  increase  in  the  Sauerbeck  index  figure.  In 
France,  the  circulation  before  the  war  can  be  estimated  at 
about  $2,000,000,000.  Starting  from  this  figure,  I  have  for 
March,  1916,  calculated  the  average  circulation  at  $3,503,- 


STATUS   OF   GERMAN    CURRENCY  53 

600,000;  here  we  have  an  increase  in  circulation  in  the  pro- 
portion of  100-175.2,  corresponding  to  an  actual  inflation,  cal- 
culated in  accordance  with  the  method  given  above,  in  the 
proportion  of  100-177.8.  For  Russia  I  have  been  able,  on  the 
basis  of  the  official  estimate  of  the  total  circulation  published 
by  the  Russian  State  Bank,  to  calculate  the  normal  circulation 
for  March,  1916,  at  $1,275,000,000,  while  the  actual  circulation 
may  be  estimated  to  have  reached  $3,254,500,000.  In  this 
case,  consequently,  there  should  be  a  relative  increase  in  the 
circulation  in  the  proportion  of  100-255.5,  which  is  in  close 
agreement  with  the  actual  inflation,  as  calculated  above,  of 
251.1.  The  relative  increase  of  the  circulation  in  Sweden  is  in- 
dicated by  the  figure  144.4,  while  the  estimated  inflation,  in  con- 
sequence of  the  exchange  rates  on  London,  amounts  to  146.2. 
It  does  not  lie  within  the  limits  of  the  present  inquiry  to  go 
further  into  these  calculations.  I  have  given  these  figures 
merely  to  show  that,  for  the  currencies  which  I  have  chosen 
for  comparison  with  the  German  currency,  there  exists  a 
real  inflation  which,  for  each  country,  must  be  considered  as 
proportional  to  the  increase  in  the  amount  of  circulating 
medium  during  the  war.  What,  then,  is  the  position  of  Ger- 
man currency  in  this  respect?  According  to  calculations 
placed  at  my  disposal  by  the  German  Reichsbank,  the  altera- 
tions in  the  amount  of  circulating  mediums  of  payment  during 
the  war  have  been  as  follows.  In  order  to  obtain  a  sound 
basis  for  the  comparison,  I  give  two  schedules  of  different 
dates,  for  periods  before  the  war: 

Feb.  28  '14  July  15  '14  Feb.  29  '16 

Gold  (in  millions  of  marks)   2,350  2,322  750 

Silver  (in  millions  of  marks)   724  727  1,092 

"  Kassenscheine " 131  145  1,361 

Bank  Notes 2,065  2,086  6,667 


TOTALS    5,270  5,280  9,870 

Up  to  February  29,  1916,  therefore,  the  total  circulation  has 
increased  since  the  corresponding  date  in  1914  in  the  propor- 
tion of  100-187.4.  If  this  calculation  is  continued  with  the 
assistance  of  the  succeeding  Reichsbank  reports,  we  find  that 


54       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

in  March,  the  average  increase  in  the  total  circulation  was  in 
the  proportion  of  100-189.1.  To  judge  by  the  rates  in  the 
exchange  in  Stockholm  and  the  absolute  depreciation  of  Eng- 
lish currency,  the  inflation  of  German  currency  is  indicated  by 
the  figure  188.1  for  January;  196.7  for  February,  and  207.7 
for  March.  From  this  follows  that,  for  Germany,  too,  the 
fall  in  the  value  of  currency  agrees  in  essentials  with  the  rela- 
tive increase  in  the  circulation  mediums.  The  differences 
shown  by  the  results  are  important.  It  is  possible  that  the 
somewhat  higher  figures  based  on  the  rates  of  exchange  for 
February  and  March  signify  that,  for  some  temporary  reason, 
the  rate  for  the  mark  was  a  little  more  unfavorable  than  it 
ought  really  to  have  been.  But  as  to  this  it  is  too  early,  as 
yet,  to  express  any  definite  opinion. 

The  idea  that  the  fall  in  value  of  German  money  should  en- 
tirely, or  even  mainly,  be  the  temporary  result  of  a  momentary 
increased  difficulty  of  foreign  payments  cannot  be  accepted. 
If  Germany  were  the  only  country  whose  money  had  depreci- 
ated, such  an  explanation  might  have  some  degree  of  plausi- 
bility. But  when  the  currencies  of  all  the  other  countries  have 
also  depreciated,  then  the  insufficiency  of  that  explanation  be- 
comes plainly  evident.  It  cannot  be  applicable  simultaneously 
to  every  country,  as  an  unfavorable  balance  of  payments  on 
the  one  side  must  correspond  to  a  favorable  one  on  the  other. 
During  the  course  of  the  war,  the  dollar  value  has  undergone 
an  inflation  approximately  in  the  proportion  of  100-150,  and 
this  in  spite  of  the  enormous  positive  balance  of  trade  in  favor 
of  the  United  States.  The  diminution  in  the  values  of  cur- 
rencies during  the  war  is  a  far  more  general,  and  a  far  pro- 
founder  phenomenon  than  can  be  explained  away  by  ascribing 
it  to  temporary  disturbances  in  the  balance  of  payment  for  any 
one  country. 

Our  estimate  of  the  inflation  of  the  mark  corresponds  fairly 
well  with  the  all  too  scarce  reports  available  concerning  the 
rise  of  prices  in  Germany.  The  German  index  figure  for  the 
expenses  for  necessaries  of  life  for  a  family  of  four  persons 
(according  to  Calwer)  fluctuates  for  the  months  of  July- 


STATUS  OF   GERMAN    CURRENCY  55 

November,  1915,  around  the  figure  of  40,  the  normal  height 
being  about  26.  The  increase  of  prices,  therefore,  is  about 
50  per  cent.,  which,  it  will  be  seen,  corresponds  very  well  with 
the  inflation  for  that  period  as  shown  by  the  diagram.  No- 
vember, 1915,  as  compared  with  November,  1913,  shows  a 
rise  of  the  index  figure  of  51.9  per  cent.,  while  the  estimated 
inflation  amounts  to  49.9%  for  Oct.,  and  55.8  for  Nov. 

What  is  the  effect  of  this  depreciation  of  the  mark  on  the 
internal  economy  of  Germany?  In  the  first  instance  it  signi- 
fies—  as  does  every  such  depreciation  —  a  revolution  in  the 
essential  conditions  of  wealth  and  incomes  to  the  advantage 
of  all  debt  encumbered  owners  of  real  estate  and  other  real 
capital,  that  is  on  the  whole  to  the  advantage  of  all  owners  of 
landed  property  and  of  people  engaged  in  business  enterprises, 
but  to  the  corresponding  disadvantage  of  all  creditors  —  not 
only  capitalists,  in  the  accepted  meaning  of  the  word,  but  also 
of  all  those  possessing  small  amounts  in  savings  banks,  life 
annuities,  etc.,  and  also  to  the  injury,  for  the  present  at  least, 
of  all  wage  earners  who  have  great  difficulty  in  getting  their 
wages  advanced  in  accordance  with  the  upward  movement  of 
the  prices.  Such  a  violent  revolution  is  always  to  be  regarded 
as  a  misfortune  and  a  hardship  for  the  many  who  suffer  from 
its  effects.  But  this  is  what  is  important:  How  does  this 
depreciation  of  German  currency  affect  the  economic  strength 
of  Germany  at  war? 

I  believe,  in  the  first  place,  the  depreciation  of  the  mark 
carries  with  it  the  necessity  for  the  observance  of  severe  and 
compulsory  economy  by  that  very  great  mass  of  the  population 
which  find  the  value  of  their  incomes  diminished.  The  dim- 
inution in  the  purchasing  power  of  the  mark  necessitates  a 
very  general  and  comprehensive  restriction  of  consumption. 
This  casts  an  interesting  light  on  the  fact  that  a  belligerent 
nation  which  is  compelled  to  utilize  all  its  economic  strength 
is  almost  without  exception  driven  to  depreciate  its  currency. 
It  is  true  that  the  immediate  cause  of  this  depreciation  is 
another  factor,  viz.,  that,  day  by  day,  larger  sums  of  money 
are  paid  out  than  find  a  return  in  the  goods  and  services  actu- 


56       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

ally  offered.  But  the  effect  is  always  that  individual  con- 
sumption is  driven  to  making  restrictions,  and  that  more  goods 
and  services  are  placed  at  the  disposal  of  the  war  authorities. 

The  path  followed  by  this  development  is  the  same  for  all 
the  belligerent  countries.  There  is  a  difference  in  degree  be- 
tween them  in  the  matter  of  the  depreciation  of  their  cur- 
rencies. But  the  more  favorable  position  occupied  by  some 
countries  is  the  result  of  support  from  abroad  gained  by  bor- 
rowing or  by  the  sale  of  securities,  at  the  cost  of  diminish- 
ing the  national  wealth  by  weakening  in  another  form  the 
economic  strength  of  the  nation.  The  degree  of  difference  as 
shown  by  the  preceding  investigation,  is  altogether  too  unim- 
portant to  be  in  any  way  decisive  as  to  the  relative  economic 
power  of  resistance  of  the  fighting  powers.  On  further  con- 
sideration, no  one  can  really  imagine  that  the  result  of  the 
war  will  depend  on  whether  one  currency  or  the  other  stands 
at  50,  60  or  65  per  cent,  of  its  original  value.  What  this 
original  value  was  has  now  become  a  matter  of  very  little 
importance,  for  war  has  to  do,  simply  and  solely,  with  present 
actual  factors. 

If  we  study  the  pages  of  historical  experience  we  find  that 
warring  states,  on  many  occasions,  have  succeeded  in  contin- 
uing the  struggle  in  spite  of  an  extremely  depreciated  mone- 
tary system,  and  that  the  fall  in  the  value  of  money  has  by 
no  means  prevented  them  from  developing  a  very  considerable 
economic  and  military  strength.  American  currency,  during 
the  Civil  War,  underwent  an  inflation  for  the  year  1865,  up 
to  as  much  as  232,  calculated  according  to  the  price  level  of 
the  paper  currency  of  the  Northern  States.  That  did  not  pre- 
vent the  war  from  being  fought  to  a  finish,  and  the  currency, 
during  the  course  of  the  extraordinary  economic  development 
that  followed,  from  gradually  regaining  its  parity  with  gold. 
A  century  ago,  England,  in  spite  of  a  depreciated  paper  cur- 
rency, issued  triumphant  from  the  struggle  against  France. 
Immediately  after  the  incredible  prodigality  with  which  the 
French  Revolutionists  issued  their  assignats,  forcing  them 
down,  to  absolute  worthlessness,  there  succeeded  one  of  the 


STATUS   OF   GERMAN    CURRENCY  57 

greatest  developments  of  power  known  in  the  history  of  the 
world  ending  in  Napoleon  Bonaparte's  dominion  over  Europe. 
With  such  examples  before  our  eyes,  we  can  hardly  be  tempted 
to  cast  a  horoscope  of  the  issue  of  the  present  struggle,  based 
on  the  degree  of  difference  in  the  depreciation  of  money  in 
the  various  states.  We  shall  be  still  less  inclined  to  do  so 
when  we  consider  how  uncertain  it  is  which  of  the  warring 
groups  will,  in  the  end,  suffer  most  from  this  depreciation. 

The  confidence  entertained  for  the  moment  by  the  neutral 
world  in  one  or  other  of  the  currencies  of  the  belligerent  na- 
tions plays  a  very  subordinate  role.  As  a  matter  of  fact  it 
seems  as  though  the  neutrals  had  no  confidence  in  any  of  them, 
but,  as  a  rule,  demand  payment  in  their  own  money  or,  at  least, 
guarantees  as  to  the  rate  of  exchange.  Even  England  has 
been  obliged  to  submit  to  such  demands.  Germany  has  be- 
come to  such  a  degree  isolated  that  she  must  rely  on  her  own 
resources,  and  the  support  she  can  obtain  from  abroad  is  of 
comparatively  little  importance.  The  confidence  felt,  or  not 
felt,  in  the  future  of  the  German  currency  cannot  be  in  any 
way  decisive  as  to  the  economic  strength  of  that  country. 

I  should  like  also  to  remind  my  readers  that  the  whole  ques- 
tion of  the  future  of  money  standards  is  hidden  in  obscurity. 
All  the  combatants  wish  the  world  to  believe  that  after  the 
war  their  currencies  will  resume  their  normal  value.  But,  in 
all  probability,  this  problem  will  possess  far  different  features 
from  those  it  now  presents.  In  the  first  place,  there  will  be 
a  number  of  problems  to  be  faced  whose  solution  it  will  be 
impossible  to  delay  and  which  will  necessitate  enormous  ex- 
penditure. Then  it  will  probably^ be  discovered  in  various 
quarters  that  the  restoration  of  the  currency  belongs  to  that 
class  of  less  urgent  undertakings,  the  performance  of  which 
can  conveniently  be  postponed.  Further,  as  far  as  I  can  see, 
an  influential  part  will  be  played  by  the  opinion  that  the  un- 
heard of  financial  burdens  left  by  the  war  will  be  incomparably 
more  difficult  to  support  if  the  currencies  are  to  be  restored 
to  their  old  level.  The  real  burden  of  an  annual  expenditure 
in  the  form  of  interest  on  a  billion  must  be  doubled  if  the 


58       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

monetary  unit  in  which  the  debt  is  reckoned  obtains  double 
purchasing  power.  From  a  future  finance  minister's  point  of 
view,  the  retention  of  the  depreciated  value  of  money  is  sure 
to  be  felt  as  a  relief. 

On  the  other  hand,  it  must  not  be  forgotten  that,  on  the  part 
of  certain  countries,  great  importance  will  be  attached  to  the 
restoration  of  currency.  Germany  belongs  most  decidedly  to 
this  number.  One  finds  in  leading  financial  circles  in  that 
country  the  unanimous  opinion  that  such  a  restoration  should 
be  carried  out  as  soon  as  the  war  is  ended.  Very  much  depends 
on  what  is  meant  by  the  restoration  of  the  currency  to  its 
normal  level.  If  it  is  considered  sufficient  to  have  the  mark 
regain  its  former  value  as  compared  with  other  standards,  the 
problem  will  be  a  comparatively  simple  one.  As  we  know  that 
even  such  currencies  as  the  pound  sterling  and  the  dollar  are 
much  depreciated,  not  very  much  will  be  required  to  bring  the 
mark  to  parity  with  them.  To  judge  by  appearances,  Germany 
will  make  great  efforts  to  attain  this  end,  and  she  will  have 
considerable  resources  at  her  disposal  for  the  purpose.  Ger- 
many has  accumulated  in  foreign  countries  large  amounts  in 
interest  and  dividends  which  she  has  been  unable  to  collect, 
and  she  possesses  in  these  supplies  a  fund  which,  when  peace 
is  restored,  will  strengthen  her  international  balance.  The 
German  maritime  carrying  trade  will  also  be  a  big  asset. 
Germany's  vessels  are  now  interned,  but  will  be  at  her  disposal 
the  moment  peace  is  concluded.  In  addition  to  these  vessels 
German  ship-owners  are  building  new  vessels  on  a  very  large 
scale.  The  information  I  received  in  this  respect  was  simply 
astounding,  and  bears  witness  to  the  vigor  of  German  com- 
mercial life,  in  spite  of  every  drawback. 

If  Germany  determines  to  bring  the  mark  to  parity  with  other 
leading  monetary  standards,  there  are  great  possibilities  of  her 
being  able  to  attain  this  end.  To  a  certain  degree  these  pos- 
sibilities depend  on  the  development  of  the  other  standards.  If 
the  dollar  and,  under  certain  conditions,  probably  the  pound 
too,  are  actually  kept  at  parity  with  gold,  much  will  depend  on 
the  value  gold  will  possess.  If,  during  the  progress  of  the  war, 


STATUS   OF   GERMAN    CURRENCY  59 

or  immediately  after  its  close,  Germany,  France  and  Russia 
should  find  it  suitable  to  get  rid  of  any  large  amount  of  their 
accumulated  gold  reserves,  an  action  which  is  not  at  all  im- 
probable, the  value  of  gold  would  easily  become  considerably 
depreciated.  This  would  especially  be  the  case  if  the  neutral 
countries,  following  the  example  of  Sweden,  endeavored  to 
exclude  gold  from  their  markets.  In  such  an  event,  the  market 
for  gold  would  become  exceedingly  restricted  in  proportion  to 
the  supply.  Under  such  circumstances  the  depreciated  Eu- 
ropean currencies  would  soon  regain  their  parity  with  gold, 
without  any  special  efforts  on  the  part  of  the  various  govern- 
ments, merely  in  consequence  of  gold  falling  to  the  level  of 
currencies  in  question.  As  gold,  in  comparison  with  the  period 
before  the  war,  already  shows  a  depreciation  corresponding 
to  a  rise  of  prices  in  proportion  of  100  to  150  or  more,  such  a 
supposition  is  by  no  means  improbable.  It  is,  however,  imag- 
inable that  the  development  of  events  will  take  another  direc- 
tion —  that  the  various  states  will  continue  to  retain  their  gold, 
still  further  to  increase  their  reserves  of  that  metal,  so  that 
gold  will  rise  in  price.  Under  these  circumstances  the  restora- 
tion of  the  parity  of  the  European  currencies  will  become  a 
matter  of  extremest  difficulty. 

It  cannot  be  said  now,  with  any  great  degree  of  assurance, 
which  of  these  alternatives  will  be  adopted.  The  future  of 
gold  is  enveloped  in  uncertainties,  and  the  future  respective 
relation  of  the  European  currencies  to  the  yellow  metal  is, 
therefore,  a  question  to  which  no  one  at  the  present  moment 
can  give  any  satisfactory  reply.  But  all  speculations  as  to  the 
future  redemption  of  one  currency  or  another,  however  inter- 
esting they  may  be  from  a  theoretic  point  of  view,  are  of  no 
importance  when  judging  the  great  question  of  the  moment, 
viz.,  what  is  the  economic  strength  of  the  fighting  powers,  and 
their  financial  ability  to  continue  the  struggle? 

If  we  regard  the  world  as  a  whole,  it  may  be  said  that  the 
war  has  occasioned  a  considerable  depreciation  in  the  value 
of  money.  The  Scandinavian  standards,  which,  for  the  mo- 
ment, have  fallen  the  least  in  value,  show  an  inflation  of  about 


60       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

150.  It  is  scarcely  probable  that  a  movement  of  such  scope  will 
be  entirely  neutralized  after  the  war.  It  is  rather  to  be  sup- 
posed that  some  part,  at  least,  of  this  general  depreciation  will 
be  permanent.  A  restoration  of  the  monetary  standards  of 
the  belligerent  nations  to  the  material  values  they  possessed 
before  the  war  must  be  considered  as  not  belonging  to  the  group 
of  problems  which  will  possess  actual  importance  after  the  war. 

NOTE. —  Since  this  was  written  I  have  been  able  to  arrive  by  calcula- 
tion at  some  figures  for  April,  1916.  As  the  Statist  has  not  published 
any  index  number  for  April,  I  have  calculated  the  English  inflation, 
approximately,  on  the  ground  of  the  Economist  index  number.  The 
inflations  for  the  various  countries  are  then  as  follows : 

March  April 

Sweden 146.2  146.8 

England  159.2  165.7 

France 177.8  186.9 

Germany   207.7  210.7 

Russia 251.1  265.5 

The  relative  position  of  Germany  is  thus  considerably  improved.  The 
relative  increase  in  the  Russian  circulation  is,  for  April,  264.4  which  very 
nearly  corresponds  to  the  actual  inflation  of  the  ruble  as  given  above. 


THE  FINANCIAL  PROBLEM 

LET    us    now    endeavor    to    approximate    Germany's 
financial  strength  and  ability  to  continue  the  struggle. 
First  of  all  we  must  remember  that  the  decisive  factor 
in  this  matter  is  the  country's  own  material  resources  and  its 
capacity  for  production.     The  problem  now  before  us  is  the 
same  as  that  already  studied  in  the  preceding  pages.     We  must 
now,  however,  look  at  the  matter  from  a  monetary  point  of 
view.     It  is  our  task  to  draw  those  general  conclusions  which 
are  possible  only  when  we  express  economic  values  in  figures 
that  allow  themselves  to  be  summarized. 

Dr.  Helfferich,  the  present  Minister  of  Finance  of  the  Ger- 
man Empire,  in  his  publication,  Deutschlands  V olkswohlstand 
1888-1913,  issued  in  1913,  estimated  the  annual  national  in- 
come of  Germany  at  43,000,000,000  marks  ($10,750,000,000), 
her  national  wealth  at  310,000,000,000  marks  ($77,500,000,- 
ooo) ,  and  the  yearly  increase  of  the  latter  at  about  8,000,000,000 
marks  ($2,000,000,000).  This  yearly  increase  should  equal 
that  part  of  the  nation's  income  that  is  saved  and  which  serves 
to  create  capital.  Most  people,  even  in  Germany,  had  esti- 
mated the  growth  of  German  capital  at  a  considerably  lower 
figure.  Quite  independently  of  Dr.  Helfferich,  and  before  I 
knew  of  the  result  to  which  he  had  come,  I  had  formed,  on  the 
basis  of  the  material  issued  in  1908  in  connection  with  the 
great  tax  reform  of  the  Empire  the  opinion  that  the  annual 
increase  of  the  national  wealth  of  Germany  at  that  period 
should  be  estimated  at  fully  8,000,000,000  marks.  The  central 
point  of  my  calculations  was  that  the  annual  progress  of  the 
economic  development  of  Germany  could  hardly  be  calculated 
at  less  than  3  per  cent.  This  figure  must  be  considered  as  a 
fairly  normal  one  for  a  progressive  European  nation,  and  this 
holds  good  for  the  annual  increase  not  only  of  incomes  and  total 
national  wealth,  but  also  for  the  yearly  increase  of  this  growth. 

61 


62       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

As  regards  Germany  especially  this  was  confirmed  in  many 
respects  by  the  material  I  used.  Helfferich's  work  offers  a 
fairly  large  number  of  summaries  by  the  help  of  which  one  can 
test  the  accuracy  of  the  progress  figure  given.  The  consump- 
tion of  bread  grain,  from  the  quinquennial  period  1886-90  to 
the  period  1908-12,  increased  by  76.3  per  cent.,  or  by  about 
2.6  per  cent,  per  year.  It  is  reasonable  to  assume  that  this 
consumption  would  increase  at  a  slower  rate  than  that  char- 
acterizing the  economic  development  as  a  whole.  The  gen- 
eral progress  figure  must,  therefore,  in  all  probability  con- 
siderably exceed  2.6  per  cent.  The  consumption  of  barley 
during  the  same  time  increased  by  4.3  per  cent,  annually; 
the  consumption  of  oats  by  2.8  per  cent.,  and  the  consumption 
of  potatoes  by  3.3  per  cent.  The  consumption  of  sugar  during 
the  25  years  1888-1913  shows  an  increase  from  398,000  tons 
to  1,283,000  tons,  or  an  annual  growth  of  4.8  per  cent.  The 
production  of  coal  and  lignite,  which  is  a  very  weighty  matter 
in  the  general  development  of  the  national  economy,  during  the 
25-year  period  1887-1912,  increased  on  an  average  of  5  per 
cent,  annually ;  during  the  same  time,  the  production  of  pig-iron 
increased  by  a  good  6  per  cent,  yearly. 

With  these  figures  before  us  we  can  scarcely  doubt  that  the 
national  income  and  wealth,  which  may  be  considered  as  in- 
creasing at  the  same  rate,  have  during  the  last  few  decades 
shown  an  actual  growth  in  real  utilities  of  at  least  3  per  cent, 
annually.  According  to  Helfferich,  the  German  national  in- 
come during  the  seventeen  years  1896-1913,  has  increased  by 
83  per  cent,  altogether.  This  would  correspond  to  an  annual 
increase  of  3.6  per  cent.  Income  statistics  are  inclined  to  give 
an  excessive  increase  figure  and  there  is  reason  to  suppose 
that  the  increase  figure  is  in  reality  considerably  lower  than 
3.6  per  cent.  Statistics  of  the  increase  in  wealth,  which  do  not 
suffer  from  the  same  defects,  are  more  reliable.  According  to 
Helfferich,  the  national  wealth  of  Germany  during  the  fifteen 
years  1895-96  to  1910-11  increased  altogether  by  50  to  60  per 
cent.  If  we  say  55  per  cent.,  this  would  correspond  to  an 
annual  increase  of  3  per  cent. 


THE   FINANCIAL   PROBLEM  63 

As  a  ground  for  comparison  it  may  be  worth  while  to  men- 
tion here  that  the  national  wealth  of  Sweden  during  the  period 
1885-1908  —  according  to  the  report  of  the  National  Defense 
Committee  for  1910  —  increased  on  an  average  by  3.18  per  cent, 
annually.  As  the  two  periods  of  time  which  have  been  taken 
as  the  basis  of  calculation  are  characterized  by  about  the  same 
value  of  money,  this  percentage  of  increase  may  be  considered 
as  an  expression  of  the  real  economic  progress  in  Sweden  dur- 
ing that  period.  The  coefficient  of  increase  for  Germany,  with 
her  larger  increase  of  population,  could  hardly  have  been  con- 
siderably less. 

The  actual  economic  development  of  Germany  during  the  last 
few  decades  is  characterized  pretty  nearly  by  the  annual  in- 
crease figure  of  3  per  cent.  If  we  calculate  the  national  wealth 
of  Germany  at  the  time  immediately  preceding  the  outbreak 
of  the  war  at  300,000,000,000  marks,  we  must  assume  that 
there  was  at  that  time  an  annual  creation  of  capital  amounting 
to  9,000,000,000  marks.  Mr.  Helfferich  has  two  estimates  of 
the  national  wealth,  one  amounting  to  285,000,000,000  marks 
and  the  other  335,000,000,000  marks,  and  he  takes  their  average 
—  310,000,000,000  marks,  as  the  probable  figure.  Our  esti- 
mate of  Germany's  annual  creation  of  capital  —  9,000,000,000 
marks  —  is,  consequently,  scarcely  too  high. 

When  the  annual  income  of  Germany  is  estimated  at  43,000,- 
000,000  marks,  this  implies  that  the  value  of  the  net  result  of 
the  annual  production  in  Germany  is  43,000,000,000  marks. 
But  productive  labor  must,  in  addition  to  this,  also  provide  for 
the  upkeep  of  buildings  and  structures,  machines  and  imple- 
ments, etc.,  in  a  word,  of  all  lasting  real  capital  in  the  country, 
and  for  the  maintenance  of  this  real  capital  at  its  full  value  by 
means  of  new  buildings  and  the  securing  of  new  materials. 
This  represents  a  very  considerable  expense.  For  buildings, 
the  necessary  annual  amortizing  is  usually  estimated  at  I  per 
cent.,  2  per  cent,  or  3  per  cent,  or  even  more,  according  to  the 
use  made  of  the  structures.  For  agricultural  buildings,  of 
course,  the  annual  diminution  in  value  is  usually  considerably 
greater.  In  addition,  there  is  the  expense  of  current  upkeep. 


64       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

For  machinery,  these  expenses  easily  rise  to  10  per  cent,  or 
more,  and  for  implements  to  15  per  cent,  to  20  per  cent,  and 
upwards.  An  estimate  of  the  average  cost  of  upkeep  and 
amortizing  of  the  whole  of  the  permanent  real  capital  must  be 
to  a  great  degree  approximate,  but  it  appears  not  improbable 
that  this  expense  must  be  put  as  high  at  least  as  3  per  cent,  of 
the  total  value  of  all  the  wealth  that  needs  upkeep. 

In  national  wealth  there  is  included,  moreover,  the  circulating 
real  capital,  that  is,  all  kinds  of  stocks  of  materials,  and  the  like, 
and  the  stores  of  products,  as  well  as  cattle,  etc.  This  circu- 
lating capital  should,  for  the  estimate  now  being  made,  be  de- 
ducted from  the  national  wealth.  How  much  of  this  national 
wealth  will  remain?  According  to  the  latest  estimate  of  the 
national  wealth  of  Sweden  (for  1908)  the  item  "stocks  and 
stores"  can  be  reckoned  at  about  10.1  per  cent,  and  the  item 
"  cattle  "  at  4.4  per  cent,  of  the  whole  real  wealth  of  the  coun- 
try. If  we  adopt  the  same  ratio  for  Germany,  we  obtain  for 
"  stocks  and  stores  "  an  amount  of  about  30,000,000,000  marks 
and  for  "  cattle  "  an  amount  of  approximately  13,000,000,000 
marks  or,  altogether,  43,000,000,000  marks.  If  we  subtract 
this  amount  from  the  total  amount  of  the  national  wealth, 
300,000,000,000  marks,  there  remain  257,000,000,000  marks  to 
represent  the  value  of  that  durable  capital  needing  upkeep. 
This  upkeep  itself,  inclusive  of  amortizing,  should  consequently 
demand  an  expenditure  of  3  per  cent,  of  the  275,000,000,000 
marks  or  7,700,000,000  marks. 

In  reality,  this  sum  represents  a  certain  amount  of  produc- 
tive work  which  under  normal  conditions  must  be  performed 
every  year.  This  productive  work  falls  outside  the  limits  of 
that  production  representing  the  net  income  for  the  year.  If, 
therefore,  we  wish  to  have  an  idea  of  the  value  of  the  whole 
of  that  productive  work  for  one  year,  the  net  income  must  be 
increased  by  7,700,000,000  marks.  The  total  annual  value  of 
the  productive  work  in  Germany  should,  therefore,  under 
normal  conditions,  be  43  +  7.7  =  50,700,000,000  marks. 

We  must  suppose  that  this  power  of  production  has  consid- 
erably decreased  during  the  war.  We  have  found  that  the 


THE   FINANCIAL   PROBLEM  65 

production  of  pig-iron  has  fallen  to  two-thirds  of  the  normal 
amount.  This  figure  can,  perhaps,  be  taken  as  representative 
for  industries  in  general.  For  agriculture,  on  the  other  hand, 
if  we  take  into  consideration  the  work  carried  out  for  the  benefit 
of  Germany  in  the  occupied  provinces  and  the  cultivation  within 
Germany's  boundaries  of  land  previously  idle,  there  will  be 
hardly  any  decrease.  If  we  ascribe  to  the  industrial  production 
twice  the  importance  possessed  by  agriculture  we  shall,  conse- 
quently, obtain  an  average  decrease  in  the  production  to  about 
78  per  cent.  If  the  returns  given  by  the  buildings  employed  as 
dwellings  are,  practically  speaking,  unaltered,  we  shall  probably 
find  that  the  estimate  of  Germany's  present  productive  power 
as  being  80  per  cent,  of  the  normal  is  a  reasonable  one.  The 
total  amount  which  is  annually  available  for  regular  expenses 
and  the  war  together  should  be  40,600,000,000  marks,  estimated 
at  the  mark  value  existing  before  the  war. 

How  much  of  this  is  required  for  regular  expenses? 
Helfferich  estimates  that  state  and  local  bodies  use  normally 
7,000,000,000  marks  of  the  national  income.  After  this  sum 
and  the  wealth  increase  of  9,000,000,000  marks  have  been  de- 
ducted from  the  normal  national  income  of  43,000,000,000 
marks,  there  remains  under  normal  conditions  for  the  consump- 
tion by  the  people  themselves  an  amount  of  27,000,000,000 
marks.  How  great  is  this  consumption  during  the  war?  To 
be  able  to  answer  this  question  we  must  first  bear  in  mind  that 
we  must  confine  ourselves  to  a  study  of  the  home-staying  pop- 
ulation's consumption,  since  the  support  of  the  military  popu- 
lation is  classed  as  war  expenses.  If  we  calculate  that  one- 
eighth  of  the  population  is  mobilized,  this  fraction  would  de- 
mand 3,400,000,000  marks.  As  the  men  mobilized,  however, 
form  part  of  that  portion  of  the  population  that  is  an  especially 
heavy  consumer,  the  sum  just  given  can  safely  be  increased  by 
50  per  cent,  or,  in  round  figures,  to  5,000,000,000  marks.  For 
the  home-staying  population,  then,  we  should  have  to  calculate 
a  normal  consumption  of  22,000,000,000  marks.  At  present, 
this  consumption  is  reduced  in  all  branches,  partly  voluntarily 
and  partly  in  consequence  of  public  measures  which  restrict  it 


66       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

by  .compulsion.  It  cannot  be  stated  with  any  degree  of  cer- 
tainty to  what  extent  consumption  has  been  reduced,  but  it  may 
be  considered  reasonable  if  we  estimate  at  least  the  same  de- 
crease that  we  formerly  adopted  for  the  production,  or  a  fall  to 
80  per  cent,  normal.  We  should  then,  if  we  take  the  mark 
at  the  same  value  as  before  the  war,  estimate  the  consumption 
of  the  home-staying  population  at  17,600,000,000  marks.  If 
to  this  we  add  7,000,000,000  for  public  expenses,  apart  from 
those  of  the  war,  and  this  sum  must  be  considered  as  a  very 
ample  one,  we  obtain  a  total  consumption  of  24,600,000,000 
marks.  If  we  subtract  this  amount  from  the  40,600,000,000 
marks  we  have  taken  to  be  the  sum  annually  available,  there 
remains  an  amount,  in  ante- war  mark- value,  of  16,000,000,000 
marks  available  for  other  purposes. 

In  this  calculation,  however,  no  attention  has  been  paid  to 
the  increase  of  capital  wealth  nor  to  its  upkeep.  During  the 
war  both  these  items  are  exceedingly  reduced.  But  there  must 
be  some  creation  of  capital.  I  have  already  mentioned  that  a 
considerable  number  of  vessels  for  the  mercantile  marine  are 
being  constructed.  In  Berlin,  work  is  still  being  carried  out 
on  the  construction  of  the  underground  railways.  However, 
no  very  great  amount  of  money  can  be  spent  for  such  purposes. 
The  expansion  of  factories,  and  similar  expenditures  for  the 
production  of  war  material,  cannot  be  taken  into  account,  as 
they  may  be  considered  as  being  covered  directly  by  the  war 
expenses.  The  upkeep  of  already  existing  capital  is,  without 
doubt,  reduced  to  a  very  low  degree.  This  circumstance,  when 
taken  together  with  the  saving  proper,  is  one  of  the  chief 
sources  whence  means  are  obtained  for  carrying  on  the  war. 
How  the  upkeep  of  capital  is  made  a  secondary  matter  is 
easily  seen  when  traveling  through  Germany;  everything  is 
made  use  of,  or  is  worn,  for  a  longer  time  than  usual,  and 
tenants  have  to  do  without  house  repairs  which,  under  ordinary 
conditions,  would  be  considered  as  necessary.  The  building 
trade  is  stagnant,  and  the  replacing  of  old  dwellings  is  certainly 
carried  out  only  in  a  very  small  way.  People  have  simply  to 
be  contented  with  what  they  have.  But,  altogether,  one  or  two 


THE   FINANCIAL   PROBLEM  67 

billion  marks  must  be  expended  for  both  these  purposes,  and 
so  we  may  estimate  the  sum  available  for  war  purposes  at,  let 
us  say,  14,000,000,000  marks  —  still  reckoning  at  the  old  mark- 
value. 

» 

I  have  made  this  general  estimate  in  order  to  give  some  idea 
of  the  manner  in  which  it  may  be  considered  possible  to  cover 
the  expenses  of  the  war.  Of  course,  it  is  impossible  to  give 
any  exact  figures  in  such  a  case  as  this.  If,  however,  we  refer 
to  the  figures  showing  the  amount  that  the  war  has  hitherto 
actually  cost  Germany,  we  obtain  a  pretty  safe  measure  of 
Germany's  financial  resources.  For  the  war  expenses  are, 
undeniably,  paid.  During  the  first  eighteen  months  that 
elapsed  after  the  beginning  of  the  war,  the  expenses  seem  to 
have  come  to  about  30,000,000,000  marks.  To  meet  this 
amount,  Germany  has  obtained  only  very  slight  contributions 
from  abroad.  The  export  of  securities  together  with  various 
foreign  credits,  according  to  the  most  trustworthy  reports,  has 
not  exceeded  1,500,000,000  marks.  That  means  that  the  coun- 
try itself  has  provided  an  amount  of  about  28,500,000,000 
marks. 

This  figure  consists  of  a  total  of  mark-amounts  that  have 
been  received  during  the  course  of  the  war.  If  the  deprecia- 
tion of  the  mark  that  has  been  going  on  during  the  whole 
period  be  taken  into  account,  it  must  be  calculated  at  different 
values.  A  glance  at  the  diagram  showing  the  depreciation  of 
currencies  (p.  52)  tells  us  that  for  the  period  up  to  the  end  of 
January,  1916,  the  average  inflation  of  German  currency  may 
be  estimated  at  about  140.  The  total  sum  obtained  within  the 
country  is,  therefore,  reduced  to  about  20,500,000,000  marks, 
if  expressed  in  the  mark-value  obtaining  before  the  war.  As 
this  amount  has  been  procured  in  one  and  one-half  years,  Ger- 
many has  been  able,  by  means  of  her  own  internal  resources, 
to  support  an  annual  expenditure  of  about  13,500,000,000 
marks,  old  mark-value.  This  amount  corresponds  pretty 
nearly  to  the  sum  which,  according  to  the  estimate  made  earlier, 
should  have  been  available  for  the  war. 


68       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

If  we  calculate  with  an  inflation  at  present  of  190,  this  sum 
would  correspond  to  about  25,500,000,000  marks  at  their  present 
value.  This  sum,  then,  gives  the  amount  which  Germany, 
should  her  economic  strength  remain  unaltered,  would  be 
able  to  expend  annually,  without  any  further  depreciation  of 
her  currency.  In  March,  1916,  the  fourth  war  loan  subscrip- 
tions amounted  to  more  than  10,500,000,000  marks,  corre- 
sponding to  about  five-twelfths  of  these  25,500,000,000.  This 
amount  can,  consequently,  be  paid  in  and  consumed  during  a 
period  of  five  months,  such  expenditure  not  necessarily  causing 
any  further  depreciation  of  German  currency.  In  other  words, 
Germany  can  spend  2,000,000,000  marks  per  month  on  the  war, 
calculating  at  the  present  mark-value.  In  my  opinion,  this  is 
the  most  accurate  characterization  of  the  present  financial  re- 
sources of  Germany. 

I  had  the  main  part  of  this  calculation  ready  long  before 
the  fourth  war-loan  was  called  for.  That,  after  more  than 
one  year  and  a  half  of  war,  there  could  be  subscribed  more 
than  10,500,000,000  marks  for  this  loan  is  good  proof  that  my 
calculations  give  a  correct  picture  of  Germany's  economic 
strength.  Those  authors  —  both  in  Germany  and  elsewhere 
—  who  considered  that  Germany's  saving  power  and  ability 
to  find  the  monetary  means  for  the  continuance  of  the  struggle 
should  be  placed  at  a  much  lower  figure,  ought  to  find  consid- 
erable difficulty  in  bringing  their  calculations  into  reasonable 
agreement  with  reality. 

As  to  the  financing  of  the  war  up  to  the  present  moment  — 
not  only  by  Germany,  but  also  by  the  other  belligerent  coun- 
tries —  the  prevailing  opinion  appears  in  a  great  many  respects 
to  differ  considerably  from  my  view  of  the  matter.  It  is  a  very 
widespread  and  popular  conception  that  when  an  extremely 
large  amount  has  to  be  expended  for  any  certain  purpose,  the 
necessary  means  are  accumulated  during  some  long  period  into 
a  fund,  which  is  afterwards  made  use  of  as  required.  This 
popular  idea  of  war  finance  starts  out  with  the  supposition 
that,  at  the  outbreak  of  the  war,  the  different  countries  had 
at  their  disposal  large  accumulations  of  "  circulating  capital," 


THE    FINANCIAL   PROBLEM  69 

which  were  gradually  consumed  during  the  war.  Thence  fol- 
lowed among  other  things,  the  popular  idea  that  for  economic 
reasons  the  war  could  not  continue  for  very  long.  Now,  when 
two  years  of  war  are  soon  past,  this  popular  idea  of  the  problem 
becomes  more  and  more  untenable. 

As  a  matter  of  fact,  the  whole  idea  of  an  accumulation  of 
"  circulating  capital,"  which  forms  the  basis  of  this  fallacy,  is 
singularly  obscure,  and  cannot  survive  the  test  of  any  thor- 
ough analysis.  A  modern  people  does  not  provide  for  itself 
by  accumulating  large  supplies  of  "  circulating  capital,"  but 
lives  from  day  to  day  on  what  its  productive  labor  places  at  its 
disposal.  In  order  to  maintain  and  constantly  continue  its 
production,  national  economy  demands  certain  stocks  of  arti- 
cles of  consumption,  materials  and  partly  manufactured  goods 
in  different  stages  of  preparation.  Commerce,  and  transma- 
rine trade  especially  has  often  very  large  stocks  of  this  kind, 
in  order  to  be  able  to  meet  orders.  It  is  these  stocks  that,  in 
reality,  form  the  "  circulating  capital "  of  a  nation. 

Germany,  of  course,  possessed  such  stocks  at  the  beginning 
of  the  war.  In  accordance  with  the  opinion  that  prevailed  in 
that  country  as  elsewhere,  the  financing  of  the  war  was  to  be 
made  possible  to  a  very  large  extent  just  by  means  of  these 
stores.  The  war  was  to  be  financed,  more  or  less,  by  consum- 
ing them.  To  some  degree  this  is  correct,  but  I  believe  that 
there  has  been  a  disposition  to  ascribe  altogether  too  great  im- 
portance to  this  factor. 

We  have  estimated  the  normal  value  of  the  stocks  of  Ger- 
many to  have  a  value  of  30,000,000,000  marks.  Such  stocks 
must  exist  if  production  is  to  continue  its  normal  course,  and 
their  amount  must  be  in  fairly  fixed  proportion  to  the  extent 
of  the  production.  In  Germany,  large  stocks  have  been  con- 
sumed since  the  beginning  of  the  war,  but  they  have  also  been 
replaced  by  others.  If  the  calculation  be  made  that  production 
in  Germany  is  now  about  80  per  cent,  of  its  normal  amount, 
it  may  be  supposed  that  nearly  the  same  holds  good  of  the 
stocks  too.  The  diminution  in  their  amount  should  come  to 
about  6,000,000,000  marks.  In  addition  to  this,  there  is  the 


70       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

diminution  of  the  cattle  stock  which  may  be  estimated  at  about 
i  or  2,000,000,000  marks.  We  come  to  the  result  that  about 
8,000,000,000  marks  of  the  war  expenses  have  been  covered  by 
the  consumption  of  stocks  previously  existing  in  the  country. 
Of  course,  this  figure  is  a  very  uncertain  one,  but  it  can  per- 
haps help  to  form  a  correct  idea  of  the  real  meaning  of  the 
problem  of  war-financing. 

However,  we  must  also  recollect  that  during  the  first  period 
of  the  war,  production  was  far  more  restricted  in  amount  than 
it  is  at  present. 

We  have  estimated  the  present  extent  of  production  at  about 
80  per  cent,  of  the  normal  amount.  If  we  could  calculate  the 
average  amount  of  production  since  the  beginning  of  the  war, 
we  should  reach  a  considerably  lower  figure.  The  figures 
which  have  been  quoted  to  show  the  amount  of  labor  unem- 
ployed, and  the  production  of  coal  and  pig-iron  during  the  first 
period  of  the  war,  point  most  decidedly  in  that  direction.  If, 
as  calculated  above,  the  normal  power  of  production  amounts 
to  50,700,000,000  marks  per  annum,  and  consequently,  to  about 
76,000,000,000  marks  in  one  and  a  half  years,  we  find  that,  if 
this  power  of  production  during  the  period  that  has  elapsed 
has  been  diminished  by  a  further  10  per  cent,  below  the  normal 
and,  therefore,  has  formed  only  70  per  cent,  of  the  normal, 
this  would  represent  a  loss  of  7,6000,000,000  marks  for  the 
first  eighteen  months  of  the  war.  Without  attaching  any 
weight  to  this  estimate,  I  wish  to  point  out  that  it  can  very 
well  be  imagined  that  during  the  period  in  question  the  ad- 
vantage of  the  consumption  of  stocks  formerly  accumulated 
has  been  approximately  balanced  by  the  disadvantage  of  the 
particularly  great  reduction  of  the  productive  powers  of  the 
country.  In  other  words,  Germany,  in  consequence  of  her 
present  increased  productive  powers  will  in  the  future  have  at 
her  disposal  about  the  same  financial  resources  as  hitherto,  in 
spite  of  the  fact  that  the  consumption  of  stocks  can  no  longer 
play  the  same  role  as  it  did  at  an  earlier  date. 

It  may  be  necessary  to  remind  the  reader  that  at  the  out- 
break of  the  war  the  German  textile  industry,  because  of  the 


THE   FINANCIAL   PROBLEM  7! 

very  depressed  state  of  the  market  that  had  been  prevailing  for 
some  time  previous,  possessed  a  very  large  stock  of  manufac- 
tured goods,  some  of  them  a  little  old-fashioned  and  not  much 
in  demand.  During  the  war  it  was  found  possible  to  sell  these 
goods,  and  as  a  result  the  textile  industry  is  now  in  a  very 
firm  position.  But  we  should  probably  make  a  mistake  if  we 
imagined  that  all  this  stock  was  now  consumed.  The  retail 
trade  has  still  large  stocks  on  hand,  and  the  general  public 
probably  also  is  so  well  provided  with  textile  goods,  that  the 
German  nation  must  possess  a  pretty  considerable  reserve  of 
such  articles,  a  reserve  which,  from  the  very  nature  of  things, 
is  a  very  elastic  one. 

Summing  up,  we  may  state  that  the  consumption  of  stocks 
has  been  of  a  certain  importance  for  the  financing  of  the  war, 
but  that  it  has  by  no  means  been  of  such  weight  that  the  pos- 
sibility of  this  financing  has  been  chiefly  based  on  it,  or  that  in 
the  future  the  financing,  in  any  general  or  decisive  manner 
will  be  dependent  on  the  possibility  of  a  continued  consump- 
tion of  the  stocks.  Those  people  who,  in  a  literal  or  a  general 
sense  of  the  phrase,  imagined  they  would  be  able  to  wear 
Germany  out  by  a  continuance  of  the  struggle  have  been  in- 
fluenced by  the  popular  idea  of  war-financing  as  a  consumption 
of  capital  previously  accumulated.  If  this  has  been  their  cal- 
culation they  must  by  this  time  be  astonished  that  the  accumu- 
lated stocks  never  come  to  an  end.  It  is  time  that  they  recon- 
sider their  economic  ideas,  and  profit  by  the  economic  experi- 
ence taught  by  the  war  —  not  only  in  Germany,  but  in  the  other 
belligerent  countries  —  that  a  nation,  to  the  extent  to  which 
it  is  restricted  to  its  own  resources,  does  not  live  on  its  ac- 
cumulated stocks  but  on  the  power  of  production  which  it  is 
able  to  develop  day  by  day.  The  war  has  continued  for  such 
a  length  of  time  that  what  Germany  at  present  is  able  to  per- 
form every  day  must  be  considered  as  a  fairly  reliable  expres- 
sion of  what  her  current  production  can  do.  But  if  this  is  the 
real  state  of  things,  the  possibility  of  Germany's  stocks  coming 
to  an  end  should  be  left  out  of  the  calculation. 

The  fact  that  Germany  has  been  able  to  continue  the  war  for 


72       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

such  a  long  period  —  at  the  moment  of  writing,  more  than 
twenty  months  —  and  that  she  could  actually  procure  from  her 
own  resources  the  many  billions  the  conflict  has  already  cost, 
is  the  surest  proof  that  the  estimate  we  have  made  of  the 
economic  strength  of  Germany  is  accurate.  It  is  also  of  inter- 
est to  endeavor,  as  far  as  the  scanty  material  as  yet  available 
will  allow  us  to  do,  to  form  an  idea  of  this  economic  strength 
of  the  country  from  other  viewpoints. 

The  fact  that  4,481,000,000,  9,103,000,000,  12,160,000,000 
and  10,712,000,000  marks  respectively  were  subscribed  for  the 
four  loans  is  in  itself  a  proof  of  strength.  But  we  obtain  a 
far  more  tangible  idea  of  the  real  meaning  of  this,  when  we 
learn  that  the  total  numbers  of  individual  subscriptions 
amounted : 

For  the  first  loan  to 1,177,235 

For  the  second  loan  to 2,691,060 

For  the  third  loan  to 3,992,059 

For  the  fourth  loan  to 5,279,645 

The  unheard-of  and  continually  increasing  number  of  sub- 
scriptions of  small  amounts  revealed  by  these  figures  is  an 
unmistakable  sign  of  well  diffused  economic  affluence,  and  an 
undeniable  proof  of  the  inaccuracy  of  the  idea  that  Germany 
is  being  gradually  "  drained  dry  "  by  the  war.  A  population 
really  suffering  from  want,  or  which  was  day  by  day  being 
forced  down  to  the  minimum  limit  of  bare  existence,  would 
hardly  be  capable  of  subscriptions  to  state-loans  in  such  num- 
bers, and  in  such  constantly  increasing  numbers. 

The  broad  base  on  which  the  economic  strength  of  Germany 
evidently  rests  is  also  apparent  from  the  movements  of  the 
savings-banks  during  the  war.  According  to  a  summary  pub- 
lished by  the  Dresdener  Bank,  this  movement,  since  the  month 
of  August,  1914,  up  to  September,  1915,  both  months  inclusive, 
has  shown  an  increase  of  deposits  amounting  to  2,801,000,000 
marks;  interest  on  deposits  amounted  to  817,000,000.  Thus, 
the  total  increase  of  saving  bank  capital  due  to  investors 
amounts  to  3,618,000,000  marks.  Of  this  amount,  2,958,- 
000,000  marks  are  said  to  have  been  employed  for  subscrip- 


THE   FINANCIAL   PROBLEM  73 

tions  to  the  first  and  second  war-loans,  after  which  there 
remained  a  net  surplus  of  deposits  amounting  to  660,000,000 
marks.  For  1915,  the  growth  of  capital  at  the  savings-banks 
is  given  at  about  3,750,000,000  marks.  When  the  paid  up 
amount  of  the  war  loans  amounted  to  4,250,000,000  marks, 
500,000,000  to  600,000,000  marks,  approximately  4  per  cent, 
of  the  savings  had  been  withdrawn. 

By  far  the  greater  part  of  the  German  war-loans  is  placed 
with  cash  subscribers.  To  some  degree  this  can  be  seen  by 
the  small  degree  to  which  holders  of  war  loan  titles  resort  to 
the  loan  facilities  offered  by  the  Imperial  Loan  Banks.  The 
sums  these  establishment  have  advanced  for  war-loans  come, 
as  a  rule,  to  only  some  few  per  cent,  of  the  total  amount. 
The  large  business  banks,  too,  are  only  to  a  very  slight  extent 
engaged  in  the  war  loans.  The  home  state  securities  pos- 
sessed by  the  eight  large  banks  amounted  at  the  close  of  1915 
to  no  more  than  276,400,000  marks.  This  sum,  which  is  not 
considerably  larger  than  the  normal,  does  not  include  any  ap- 
preciable sum  of  war  loan  titles.  It  may  be  assumed  that  these 
banks  hold  somewhat  larger  amounts  of  treasury  bills  issued 
for  the  war.  But  as  the  whole  sum  of  bills  which  embraces 
in  addition  to  treasury  bills,  business  bills  of  every  description, 
does  not  amount  to  more  than  2,492,400,000  marks,  it  may  be 
understood  that  what  the  banks  have  advanced  for  the  war 
by  means  of  treasury  bills,  does  not  form  more  than  a  quite 
inconsiderable  fraction  of  the  more  than  30,000,000,000  marks 
the  war  has  hitherto  cost.  The  total  loans  made  by  these  banks 
on  securities  and  to  the  Stock  Exchange  do  not  come  to  more 
than  893,600,000  marks,  a  figure  that  does  not  allow  of  any 
margin  for  investment  in  war  loan  scrip.  The  Imperial  Loan 
Banks  and  the  ordinary  banks  have  done  great  service  in  the 
actual  paying  in  of  the  war  loans,  but  in  the  definite  invest- 
ment of  capital  in  these  loans  they  have  not  played  a  con- 
siderable part.  The  bonds  have  been  taken  for  the  most  part 
by  the  public  as  an  investment  of  actual  savings. 

What  is  the  position  of  the  financing  of  the  war  up  to  the 
present  from  a  financial  point  of  view?  Is  not  this  constant 


74       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

borrowing  of  new  money,  made  regardless  as  to  means  of 
repaying  the  loans  and  even  without  a  thought  as  to  whether 
the  interest  on  them  can  be  paid,  a  very  serious  matter? 

In  reply  to  these  questions  it  may  be  stated  that  the  financial 
position  of  Germany  before  the  outbreak  of  the  war  was  very 
sound.  The  Empire  and  the  federated  states  together  had  a 
debt  of  somewhat  more  than  21,000,000,000  marks.  But,  as 
opposed  to  this,  there  were  productive  assets  to  a  higher 
amount.  The  value  of  the  German  state  rail  ways  "alone  was 
estimated  at  about  20,000,000,000  marks.  In  addition,  there 
are  state  assets  in  the  form  of  landed  property,  forests  and 
mines,  reckoned  as  worth  at  least  4,000,000,000  marks. 

All  the  taxes  (imperial,  state,  and  local)  were  estimated  in 
1911  at  a  little  more  than  4,000,000,000  marks.  By  the  middle 
of  the  summer,  the  national  debt  for  the  war  will  have  risen 
to  about  40,000,000,000  marks.  At  5  per  cent.,  this  means  a 
yearly  interest  of  2,000,000,000  marks.  The  war,  then,  will 
have  occasioned  an  increase  of  50  per  cent,  in  the  total  burden 
of  taxation.  That  the  German  nation  can  support  such  an 
increase  is  beyond  all  doubt.  But  the  devising,  and  the  ad- 
ministration by  financial  and  political  measures  of  such  an 
increase  of  the  public  income,  and  the  solving  in  practice  of  all 
the  technical  difficulties  following  in  the  train  of  the  new 
taxation  which  —  especially  when  we  take  into  consideration 
the  federal  character  of  the  German  Empire  —  are  certain  to 
arise,  is  quite  another  matter.  Whatever  arrangements  are 
made,  the  taxation  will  assuredly  be  felt  as  a  tremendous  bur- 
den, and  will  demand  sacrifices  which  at  this  moment  the  peo- 
ple can  hardly  conceive  and  in  no  quarter  are  prepared  to 
accept. 

There  is  full  reason  to  criticize  existing  financial  policies  to 
the  extent  we  have  done,  but  this  criticism  applies  not  to  Ger- 
many merely  but  to  all  the  nations  in  the  conflict.  War  is 
carried  on,  property  is  destroyed,  billions  of  money  are  ex- 
pended, but  not  one  of  the  warring  powers  pauses  for  a  mo- 
ment to  direct  a  serious  thought  to  the  prospects  of  the 
future,  and  to  consider  how  it  will  be  possible  to  pay  the  heavy 
bill. 


THE   FINANCIAL   PROBLEM  75 

Such  reflections  may  be  made  by  a  neutral  observer.  They 
are  of  no  importance  to  states  at  war.  The  belligerents  pay 
absolutely  no  consideration  to  anything  else  than  the  thought 
of  bringing  the  war  to  a  successful  and  satisfactory  end.  If, 
therefore,  we  wish  to  form  an  objective  opinion  of  their  ability 
to  continue  the  struggle,  it  is  quite  unnecessary  to  take  into 
consideration  the  question  of  what  is  to  happen  after  the  war. 
For  the  moment  this  question  is  of  no  importance. 

Under  the  conditions  now  prevailing  in  Germany,  that  em- 
pire can,  without  any  great  difficulty,  by  means  of  raising 
loans,  have  placed  at  its  disposal  as  good  as  the  whole  of  that 
part  of  the  national  income  which  is  not  devoted  to  the  neces- 
sary current  consumption.  This  consumption  is  already  con- 
siderably reduced,  but  there  is  no  doubt  that  it  is  possible  for 
Germany  to  make  further  restrictions,  and  thus  still  more  in- 
crease its  war  funds.  Each  further  extension  of  the  "  ticket- 
system,"  or  of  the  other  methods  by  which  individual  con- 
sumption is  now  regulated  in  Germany,  must  act  in  the  same 
direction.  And  the  income  which  thus  becomes  superfluous 
can,  should  it  be  necessary,  be  employed  more  effectively  for 
war  purposes  than  has  hitherto  been  the  case.  All  this  can 
and  will  be  carried  out  as  long  as  the  tremendous  pressure 
of  the  war  is  felt  in  the  country.  Afterwards  it  will  no  longer 
be  possible.  But  it  is  of  no  importance  whatever  to  consider 
the  difficulties  that  may  arise  in  the  future,  and  such  diffi- 
culties are  perfectly  irrelevant  to  the  problem  we  have  had  to 
investigate. 


CONCLUSIONS 

THE  question  of  Germany's  economic  ability  to  hold 
out  during  the  war  is  of  paramount  general  interest. 
It  is  the  first  time  under  modern  conditions  that  an 
attempt  has  been  made  to  isolate  a  great  nation  completely 
from  the  outer  world,  and  therefore  also  the  first  time  that 
a  country,  hitherto  existing  as  an  integral  link  in  the  world's 
economic  system,  is  put  to  the  test  of  having  in  the  main  to 
support  itself  and  prove  its  ability  to  subsist  under  these  new 
conditions.     In  wondering  doubt  the  world  has  awaited  the 
result. 

To  begin  with,  it  was  no  doubt  the  all  but  universal  opinion 
that  Germany  would  be  able  to  hold  out  for  a  limited  period 
until  her  accumulated  supplies  were  exhausted  and  then  have 
to  give  away.  When  the  fighting  had  lasted  six,  twelve  and 
twenty  months,  and  Germany  still  showed  undiminished  eco- 
nomic strength,  discussion  started  everywhere  regarding  the 
economic  possibility  of  such  a  demonstration  of  strength. 
The  interest  in  these  discussions  may  best  be  judged  by  the 
fact  that  well  nigh  everybody  has  felt  the  necessity  of  forming 
his  own  theory  regarding  the  problem  of  war  finance.  For 
this  reason  my  attempt  in  the  foregoing  pages  to  analyze  the 
problem  may  count  upon  interest  from  the  great  majority  of 
readers  who  do  not  generally  devote  time  to  the  study  of  such 
subjects. 

There  seem  to  be  two  main  fallacies  that  have  led  England 
and  a  large  part  of  the  rest  of  the  world  to  the  conclusion 
that  Germany  could  not  stand  a  prolonged  period  of  isolation. 
The  one  is  the  exaggerated  idea  people  have  regarding  the 
importance  of  foreign  trade  under  modern  economic  condi- 
tions. This  view  is  natural  to  England  and  to  a  certain  extent 
justified  by  conditions.  But  as  for  the  other  great  nations, 
it  is  mainly  a  popular  illusion  arising  from  the.  disproportion- 

76 


CONCLUSIONS  77 

ate  interest  devoted  to  foreign  trade  in  politics  and  in  statistics. 
The  other  fallacy  is  that  people  live  on  accumulated  riches, 
on  "money"  or  large  stocks  of  commodities.  The  entirely 
exaggerated  ideas  as  to  the  importance  of  stocks  of  commodi- 
ties under  modern  economic  conditions  has  led  to  the  conclu- 
sion that  a  belligerent  country,  which  does  not  receive  help 
from  outside,  must  sooner  or  later  exhaust  its  resources. 

The  course  of  the  war  has  already  proved  the  untenable 
nature  of  these  views  and  fully  proved  first  —  as  sound  teach- 
ings of  political  economy  long  ago  should  have  proved  —  that 
a  nation  lives  mainly  on  what  it  day  by  day  creates  by  its  pro- 
ductive work,  and  second,  that  a  country  like  Germany  is  able 
to  do  so  without  exchange  of  commodities  with  foreign  coun- 
tries. 

But  the  human  mind  is  slow  to  divest  itself  of  ideas  to 
which  it  has  become  accustomed.  In  England  people  are  re- 
luctant to  admit  fully  the  truth  forced  upon  them  by  actual 
development;  they  cling  to  the  idea  that  it  is  only  the  incom- 
pleteness of  the  blockade  that  has  enabled  Germany  to  live, 
that  she  will  ultimately  be  starved  into  submission  if  only 
every  little  hole  can  be  still  more  effectively  stopped.  But 
they  are  mistaken.  As  regards  supplies  from  the  Northern 
countries  they  are  under  present  conditions  very  acceptable 
to  Germany ;  but  it  would  be  utterly  wrong  to  ascribe  to  them 
any  sort  of  influence  as  regards  Germany's  ability  to  hold  out. 
Of  great  importance  are  the  supplies  from  the  Southeast. 
But  Germany  is  laying  her  plans  for  continued  war  economy 
without  taking  count  even  of  these  supplies. 

The  strongest,  in  fact  the  conclusive  proof  that  Germany 
can  economically  hold  out,  is  that  she  has  already  done  so  for 
twenty  months.  In  the  preceding  chapters  I  have  shown  that 
the  first  year  of  the  war  was  by  no  means  specially  favorable 
economically,  and  that  even  taking  the  whole  period  of  the 
war  this  cannot  be  considered  the  case ;  that,  on  the  contrary, 
a  number  of  circumstances  indicate  that  Germany's  economic 
conditions  in  certain  important  directions  are  better  to-day 
than  during  the  earlier  phases  of  the  war.  I  have  given  rea- 


78       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

sons  for  the  opinion  that  this  opinion,  financially  considered, 
may  well  be  assumed  to  outweigh  the  deterioration  in  other 
fields.  This  circumstance  is  obviously  subversive  of  the  the- 
ory on  which  the  blockade  of  Germany  is  based. 

Of  course  Germany  is  not  so  strong  economically  as  during 
the  last  years  of  peace.  But  in  peace  time  consumption  had 
reached  a  scale  which  could  stand  a  great  reduction.  We 
have  seen  that  this  reduction  need  not  in  essentials  reduce  the 
German  to  a  lower  level  of  consumption  than  that  on  which 
many  other  civilized  people  exist  or  than  even  the  Germans 
themselves  were  accustomed  to  a  very  few  decades  since,  and 
on  which  they  were  an  active  and  powerful  people.  The  low- 
ering of  the  standard  of  living  —  it  may  appear  to  outsiders 
important  and  for  those  concerned  hard  —  cannot  involve  any 
serious  harm  or  prevent  the  continuation  of  the  war. 

Let  any  Swede  who  imagines  that  the  German  people  have 
reached  the  lowest  standard  of  living  that  a  nation  can  endure 
call  to  mind  only  for  a  moment  the  privations  our  people  suf- 
fered during  Sweden's  wars.  By  comparison,  what  has  hith- 
erto been  demanded  from  the  German  population  in  the  way 
of  economic  sacrifice  will  then  appear  insignificant.  And  if 
any  German  thinks  of  what  his  people  had  to  pass  through 
during  the  long  and  bitter  wars  that  from  time  to  time  have 
been  waged  in  and  over  Germany  he  will  admit  that  any  com- 
parison with  present  times  is  absurd. 

If  the  war  were  to  continue  for  years  Germany  would  be 
weakened  economically.  But  there  is  hardly  any  real  reason 
to  assume  that  this  weakening  should  occur  more  rapidly  in 
Germany  than  in  the  countries  of  her  opponents.  If  the  bel- 
ligerents' economic  power  is  used  up  by  degrees,  but  about  the 
same  degree  for  all,  the  war  can,  in  so  far  as  it  depends  on 
economic  conditions,  continue  from  year  to  year  until  Europe 
is  completely  exhausted.  Truly  a  melancholy  perspective! 
But  the  future  can  hardly  be  viewed  in  any  other  light  by  any 
one  who  objectively  strives  to  gain  a  clear  understanding  of 
what  it  means  to  say  the  war  is  to  continue  until  Germany's 
economic  ruin  is  accomplished. 


CONCLUSIONS 


79 


My  task  has  been  to  give  as  far  as  possible  a  correct,  but  in 
any  case  a  fully  objective  view  of  Germany's  economic 
strength  and  ability  to  hold  out.  How  far  I  have  succeeded 
will  be  judged  differently.  I  only  wish  that  that  judgment 
may  not  be  affected  by  political  views  of  the  great  struggle 
or  by  sympathy  for  the  one  or  other  side.  Indeed,  there  is 
after  all  no  necessity  why  a  political  point  of  view  should  enter 
when  we  are  considering  a  question  like  the  present.  The 
task  I  have  attempted  is  essentially  of  a  neutral  nature  —  this 
point  I  would  again  emphasize.  It  should  be  of  at  least  equal 
interest  to  Germany's  opponents  as  to  Germany  herself  to 
obtain  an  objective  statement  of  her  economic  position.  I  am 
prepared  to  find  that  anti-Germans  of  the  kind  that  cannot 
abandon  ingrained  political  bias,  will  consider  my  statements 
too  favorable  for  Germany,  and  will  accuse  me  of  lack  of  ob- 
jectivity. This  does  not  worry  me.  But  I  venture  to  hope 
that  men  in  responsible  positions  on  the  Entente  side  may  find 
my  conclusions  worthy  of  consideration.  They  may  perhaps 
think  that  my  estimate  of  Germany's  economic  strength  re- 
quires some  modification.  But  from  their  point  of  view  a 
most  important  thing  is  not  to  make  any  mistake  in  the  oppo- 
site direction.  No  impartial  observer  and  hardly  any  of  the 
leading  men  of  the  Entente  themselves  would  deny  that  they 
have  from  the  beginning  underestimated  the  economic  strength 
of  their  opponent.  This  mistake  should  not  be  continued.  If 
the  war  is  to  go  on  indefinitely  one  should  make  sure  that  one 
understands  fully  what  has  to  be  faced. 

I  can  imagine  that  Germany's  opponents  argue  thus: 
"  Next  summer,  autumn,  Christmas,  or  at  any  rate  in  a  year, 
Germany's  economic  resources  must  be  exhausted ;  having 
made  such  sacrifices  for  the  war,  we  must  try  to  hold  out  for 
the  comparatively  short  period  it  may  still  last."  It  would  be 
disastrous  if  such  arguments  should  prevail  any  longer,  for 
they  are  absolutely  wrong.  But  I  am  not  discussing  military 
prospects,  which  I  am  not  competent  to  judge.  But  assum- 
ing that  the  military  position  remained  about  stationary,  the 
economic  position  will  not,  as  far  as  I  can  see,  offer  any 


8o       GERMANY'S  ECONOMIC  POWER  OF  RESISTANCE 

reason  for  the  concessions  on  the  part  of  Germany.  In  three, 
six  or  twelve  months  Germany's  economic  strength  will  essen- 
tially and  from  the  point  of  view  of  continuing  the  war  be 
about  the  same  as  now.  I  have  probably  had  better  oppor- 
tunities of  forming  an  opinion  on  this  point  than  the  statesmen 
of  the  Entente  and  have  been  able  to  do  so  under  more  undis- 
turbed conditions  than  they.  I  wish  to  press  home  my  view 
so  that  at  any  rate  a  prolongation  of  the  war  with  its  attendant 
misery  for  the  whole  of  humanity  may  not  be  forced  upon  the 
world  merely  owing  to  continued  miscalculations  regarding 
Germany's  economic  power  of  resistance. 


THE   END 


W40 


YB  Mk09 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 


